- ASX 200 newcomer Codan (CDA) has announced a $59 million buyout of U.S. mission-critical tech giant Zetron today
- Codan will fund the buy through its existing cash reserves and a recently-approved $100 million banking facility
- Codan specialises in making and supplying communications, metal detection and mining tech to a range of sectors
- Zetron, on the other hand, specialises in emergency response technologies including voice dispatch, emergency call taking, mapping, and more
- This makes the companies’ tech highly complementary — particularly in light of the U.S.’ potential Next Generation 911 (NG911) emergency services upgrade
- The Zetron buy is expected to grow Codan’s employee base from 140 people to 320 people and bring in $67 million in sales over the 2022 financial year
- Shares in Codan closed 2.78 per cent higher this afternoon at $15.87 per share
ASX 200 newcomer Codan (CDA) has announced a $59 million buyout of U.S. mission-critical tech business Zetron today.
Codan will fund the purchase through its existing cash reserves and a recently-approved $100 million banking facility.
The Zetron buyout will be made on a cash-free, debt-free basis — meaning the Zetron sellers will pay off all debt and extract all excess cash before the transaction is settled. Codan expects the purchase to be completed by the end of April.
Codan CEO Donald McGurk said the Zetron buy is in line with Codan’s strategy to transform its communications businesses from “products” to “solutions”.
“The acquisition allows us to capitalise on Zetron’s extensive distribution network, brand strength, and customer loyalty,” Donald said.
Complementary services
Codan specialises in manufacturing and supplying communications, metal detection and mining technology across the globe.
The company’s tech is used in a range of sectors including defence, emergency services and mining, and with a market cap just shy of $3 billion, CDA was added to the S&P/ASX 200 index in March 2021.
Meanwhile, Zetron offers a suite of emergency response technologies including voice dispatch, emergency call taking, mapping, and more — making its products and services highly complementary to those already offered by Codan.
Zetron sells its products to more than 100 countries through 300 distribution partners with an especially strong brand in North America.
Of particular interest to Codan, however, is Zetron’s Next Generation 911 (NG911) tech. This is a United States initiative to update its 9-1-1 emergency service to improve public communications.
An infrastructure bill is currently under consideration by the U.S. government which includes US$15 billion (around A$20 billion) in funding for NG911. If passed, the bill would enhance emergency number services to allow voice, photo, video and text messages from the public to the 9-1-1 network.
Zetron’s tech has the potential to play a key role in this emergency services upgrade.
Stronger business, stronger earnings
The Zetron buyout is expected to grow Codan’s employee base from 140 people to 320 people.
Importantly, Zetron is also expected to bring in about $67 million in sales revenue and $8 million in earnings before interest, tax, depreciation and amortisation (EBITDA) in the 2022 financial year — making today’s deal earnings-per-share accreditive.
Codan plans to merge its Critical Communications and Zetron businesses to make one single mission-critical communications company operating under the Zetron brand.
“Zetron and Codan have a proud history of providing mission-critical communications and the combination of the two companies will enable us to better meet our customers’ demand for integrated solutions,” Codan President for Critical Communications Scott French said.
Shares in Codan closed 2.78 per cent higher this afternoon at $15.87 per share — just shy of the company’s all-time-high price of $16.19 in mid-March this year.