Cohort announces its largest acquisition ever

Cohort announced the acquisition of EM Solutions for AUD 144m (£75m) on Thursday, in a deal expected to close by the end of the year.

The AIM-traded firm said it would mark a significant expansion of its presence in the fast-growing naval satellite communications (SATCOM) market.

It said the Australia-based EM Solutions, a leading developer of high-end SATCOM terminals for global naval and defence customers, would become the seventh standalone business within Cohort's communications and intelligence division.

The acquisition was being financed through Cohort's existing cash reserves, a debt facility, and a fully underwritten £40m institutional placing at 875p per share.

A retail offer through PrimaryBid was meanwhile raising an additional £1m.

The board said the acquisition aligned with Cohort's strategy to diversify its defence communications portfolio and broaden its naval systems offerings.

It would provide the company with increased exposure to markets in the UK, NATO Europe, Asia, South America, and Australia - regions identified as strategic growth areas.

EM Solutions’ established order book of AUD 175.4m would contribute to Cohort's pro forma order book, which now exceeded £650m.

Financially, the acquisition was expected to be accretive to adjusted earnings per share from the first full year of ownership.

The company said it projected a tax-adjusted return on invested capital exceeding its weighted average cost of capital by the 2028 financial year.

For 2023, EM Solutions reported revenues of AUD 43.1m and EBIT of AUD 11.5m, excluding non-core documentation services.

Cohort said its pro forma net debt-to-EBITDA ratio post-acquisition was forecast to remain below 1.0x, maintaining a strong financial position.

“The proposed acquisition of EM Solutions in Australia is highly complementary and is in line with our stated strategy to accelerate growth by making targeted acquisitions in the UK and overseas,” said chief executive officer Andy Thomis.

“Australia is an increasingly important strategic region, reflecting the increased security challenges in the Indo Pacific, and the creation of the AUKUS alliance.

“EM Solutions represents a compelling opportunity to access the fast growing satellite communications market, further broadening the Group's strong existing naval systems service offering, whilst bringing new customers and enhancing our combined position in the UK, NATO Europe, Asia and South America.”

Thomis said it was the company’s largest acquisition to date.

“With the strong momentum being reported by Cohort and EM Solutions, together with the substantial combined orderbook, the acquisition is expected to be materially enhancing to adjusted EPS in the first full financial year and onwards.”

At 1216 GMT, shares in Cohort were up 5.27T at 962.2p.

Reporting by Josh White for Sharecast.com.