Glove maker Ansell Limited (ASX: ANN) has announced a US based acquisition, should you buy shares based on this news?
In 1905, Eric Ansell founded the Ansell Rubber Company, initially a balloon & condom company that eventually expanded into surgical, household and work gloves. The company recently divested its sexual wellness segment to focus more on the safety side of its operations.
Ansell’s US acquisition news
Ansell has announced the acquisition of Ringers Gloves, which is a leading provider of specialty impact gloves to oil & gas and general industry segments. It is headquartered in Houston, Texas.
The total acquisition cost is US$70 million. For that price, Ansell is acquiring $34 million of sales and 39 employees.
Ansell said that Ringers Gloves has a best-in-portfolio of impact protection gloves and has become one of the most recognised impact glove brands in the industry.
Explaining the thought process behind the deal, the company said combining Ringers Gloves’ product offering and oil & gas vertical expertise with Ansell’s Guardian aligned solution selling approach and global footprint should be a winning combination for customers and the company.
Ansell CEO Magnus Nicolin was confident the company could extract value from the deal:
“Ansell has a track record of achieving accelerated growth from highly synergistic strategic acquisitions where the acquired businesses can be rapidly developed through leveraging Ansell’s global sales reach and strength of customer relationships and Ringers presents an excellent new opportunity for us.”
Is the Ansell share price a buy?
The Ansell share price is marginally down 0.09% in response to the news, so investors don’t appear excited by the announcement.
The muted response might be because Ansell expects the acquisition, including all transaction costs and integration expenses, to be approximately 1 cent dilutive to earnings per share (EPS) in FY19 and add 1 cent to EPS in FY20.
I wouldn’t be a buyer on today’s news, and it doesn’t look great value at 24 times FY18’s continuing earnings. It may be a fairly defensive business, but I think it’s possible to find reliable ASX shares with better potential growth.
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