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Why the Adairs share price jumped 22% today

Motley Fool Staff
Acquisition

The Adairs Ltd (ASX: ADH) share price went up almost 22% today after making an announcement.

The home furnishings business told investors that it would be acquiring Mocka for an initial enterprise value of $75.5 million, subject to customary conditions and the deal is expected to complete in mid-December. 

Adairs described Mocka as a “highly efficient, vertically integrated and profitable pure-play online retailer of home and living products operating in Australia and New Zealand, with a strong track record of growth, attractive margins, and high levels of profitability and cash generation. 

The acquisition price is an implied multiple of 8.7x FY20’s earnings before interest and tax (EBIT) before synergies. 

It would increase Adairs’ online revenue to 29% of total revenue, it will deliver pro forma earnings per share (EPS) accretion of around 10% and pro forma net debt divided by FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) will be around 1x. 

The deal will be funded by a mixture of debt and approximately 3.2 million Adairs shares issued to the vendors. 

The post Why the Adairs share price jumped 22% today appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019