The WiseTech Global Ltd (ASX: WTC) share price is up after the ASX tech share announced another acquisition called Envase.
WiseTech is one of the biggest technology businesses on the ASX. It’s the developer of leading logistics execution software CargoWise.
WiseTech buys Envase
The ASX tech share described Envase Technologies as a leading provider of transport management system software for intermodel trucking and landslide logistics in North America in a deal worth US$230 million.
Envase is based in the US. Its software provides solutions for carriers to automate and provide visibility for the movement of containers across “all aspects of import and export haulage operations from port and rail terminals to the destination.”
The acquisition has more than 1,300 customers across North America including trucking companies, ports, depots and warehouses.
WiseTech said that Envase is expected to generate approximately US$35 million of revenue for the 2023 calendar year, with an EBITDA (EBTDA explained) margin in the low to mid 20% range.
How is the deal being funded?
WiseTech explained that 70% of the deal will be funded by cash (US$161 million), while the other 30% will be paid for with new WiseTech Global shares (US$69 million). Paying some of it with WiseTech shares seems like a smart move when the WiseTech share price is valued at such a high price/earnings ratio (p/e ratio).
The cash part of the deal will be funded from existing cash reserves, while the new WiseTech shares being issued will be subject to a 12-month escrow arrangement from the date of completion. In other words, they aren’t allowed to sell any shares for a year.
One-off transaction costs of around US$10 million will be funded from existing cash reserves.
This deal is expected to be completed in February 2023.
Management comments
The WiseTech founder and CEO Richard White said:
This is a strategically significant acquisition in landside logistics, which extends and strengthens our position in one of our six key CargoWise development priority areas, and we’re extremely pleased to have the Envase team join the WiseTech Global group.
Final thoughts on the WiseTech share price
I think WiseTech is a very important business for the global economy. If the acquisition improves its software offering and entrenches it in more of the global logistics world, then it’s a good move.
I’d be happy as a shareholder, but I think the WiseTech share price seems too expensive, particularly with interest rates now much higher than a year ago. Yet the WiseTech share price is up 17% in 12 months.
