The WiseTech Global Ltd (ASX: WTC) share price is in focus after announcing a huge takeover. It’s currently up by 4%.
WiseTech is a leading provider of logistics software globally. It has over 16,500 logistics customers around the world across 195 countries, including 46 of the top 50 global third-party logistics providers and 24 of the 25 largest global freight forwarders worldwide.
WiseTech buys E2open for US$2.1 billion
WiseTech announced to the ASX it has entered into a binding agreement to acquire US-based E2open (NYSE: ETWO) for an enterprise value of US$2.1 billion, fully debt funded.
The ASX tech share described E2open as a leading provider of software as a service (SaaS) on the global logistics value chain.
What will this acquisition add?
The ASX software company said this acquisition “adds a strong complementary product suite that extends the CargoWise ecosystem, especially in adjacent areas of domestic logistics, carrier integration, global trade supply chain management, all of which benefits customers and end consumers, creates cost efficiency and expands online connectivity between customer groups.”
It’ll help WiseTech’s plans to create a multi-sided marketplace connecting asset-based carriers, logistics providers, importers, exporters, shippers and many logistics and supply chain participants, according to the company.
WiseTech also said E2open expands its total addressable market and grows its customer base with a network of 500,000 connected enterprises in adjacent markets, including a connection to major ocean carriers, with around 5,600 customers and more than 250 blue-chip customers.
The ASX tech share said there is little overlap between the two businesses’ customers, products and markets.
The transaction is expected to add to Wisetech’s earnings per share (EPS) in the first year, before taking into account for the synergies.
Debt
The acquisition price, transaction costs and working capital requirements will be funded through a new US$3 billion debt facility.
The debt facility comprises multiple tranches with staggered maturities of up to five years.
The lender group comprises six existing banks and three new lenders.
Final thoughts on WiseTech shares
It’s a big move by the business, but the reasoning makes sense and should add more to its capabilities. The business is taking on a lot of debt to make this happen, so management seem confident on the deal. In a falling interest rate environment, the debt may not be as expensive in a few months or a year.
The market seems to like it, with the WiseTech share price currently up more than 4%. Time will tell whether investors are right to be excited about the deal.
