“…chief executive Gary Carroll also said there would be strong synergies if it bought the $700 million-plus Affinity Education business.”
Well, except for cutting duplicate head office costs, one has to wonder where those “strong synergies” would be coming from? And I guess quite a lot of synergies would be needed, to justify paying a 10-11x EV/EBITDA multiple (corresponding to the 700m$ indicative acquisition price), when G8 themselves are currently trading at an EV/EBITDA of just about 8.0x.
Plus, given that G8’s NIBD/EBITDA is already on track to reach 2.0x over the next year because of the committed development pipeline alone, the vast majority of the acquisition consideration would have to be financed with a capital raise. And 700m$ (or thereabout) is nearly two thirds of G8’s current market cap.
So, whichever way I look at it, I personally struggle to see how this deal could possibly end up being value-accretive, from the perspective on an existing G8 shareholder.
IMHO & DYOR
GEM Price at posting:
$2.36 Sentiment: None Disclosure: Not Held
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