"Anyone care to comment on the below:One-off pre-tax integration and transaction costs of approximately $360m are expectedto be incurred over the period to end FY24.that seems awfully high that outweighs the cost synergies."
Hi Apothesis,
Sure will comment. That was already fully disclosed in the original outline given to investors in August of 2020. So not new news.
Here is an extract from the Investor update Aug 31, 2020.
• Attractive financial metrics: • Targeting pre-tax synergies of $150 million per annum by the third full year of ownership. • Expected to deliver in excess of 20% EPS accretion on an FY21F pro forma basis2 , including $150 million of estimated pre-tax synergies, excluding transaction and integration costs. • Targeting return on funds employed of c. 15%3 by the third full year of ownership. • One-off pre-tax integration and transaction costs of approximately $360 million to be incurred over ~4 years
So IFL is now telling us that they (in May 2021) STILL expect to deliver the synergies and still expect to have the one off transaction costs. I like when companies deliver what they say they will deliver (ok or maybe a bit better than they say...)
Unfortunately there are no free lunches in M&A. There is a veritable conga line of advisors and they all get their cut... advising bankers, accounting firms, law firms, tax firms, etc etc etc. Each time you sell (or buy) a firm, or division of a company they turn up ... and it is even worse when you float a small company. It is just part of the cost of getting a deal done. It likely also includes planned costs for redundancies, lease breaks, etc etc.
Hopefully when the dust settles they will have needed less than 360M - and if it was fully provisioned up front then any leftovers could be released.
I do not claim to understand the current valuation of this company - it seems to me that it is valued with MLC worth $0 and the original IFL at a discount to boot.
Cheers.
Cuppa
IFL Price at posting:
$3.96 Sentiment: Buy Disclosure: Held
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