1. 72.2k
    Posts

    Southern Cross Electrical Engineering Limited (ASX: SXE) hereby requests an immediate trading halt in respect of
    its securities.
    The trading halt is requested pending an announcement regarding a strategic acquisition.
    The Company requests that the trading halt remain in place until the earlier of the time the Company makes an
    announcement in relation to this matter or the commencement of trading on Thursday 19 November 2020.
    The Company is not aware of any reason why the trading halt should not be granted.
    Yours sincerely

    courtesy of Bell Direct
    ==============================================================================

    DYOR

    i hold SXE

  2. 72.2k
    Posts

    Highlights
    SCEE to acquire Trivantage for an enterprise value of up to $53.5m1
    :
     Trivantage is a specialised electrical services group with over 50 years operational experience of
    providing complex electrical solutions across Australia
     Trivantage is primarily a services oriented business characterised by a strong degree of recurring and
    maintenance work
     Acquisition is a milestone in SCEE’s strategy to enhance its service and maintenance capabilities and
    grow into adjacent and complementary sectors and new geographies
     Trivantage is budgeted to achieve FY21 revenue of circa $130m and normalised EBIT of $10.8m2
    ,
    delivering enhanced scale and double digit EPS accretion for FY21F for SCEE on a pro forma basis3
     Following the acquisition, the combined SCEE group is expected to generate revenue of circa $500m
    on a pro forma FY21F basis
     Anticipate strong operational synergies and considerable cross-selling opportunities
     Acquisition consideration structured to ensure ongoing alignment and acquisition success. Initial
    consideration is payable via $25.0m in cash on completion, and a further $10.0m cash and $5.5m in
    SCEE shares payable after achievement and confirmation of Trivantage FY21 targets. Further cash
    components will be payable subject to achieving performance hurdles in FY22 and FY23
     SCEE to maintain a strong balance sheet with flexibility to pursue further growth opportunities
     Trivantage management to remain in business
     Paul Chisholm (significant shareholder and Chairman of Trivantage) to be invited to join SCEE Board
    Overview
    Southern Cross Electrical Engineering Limited (“SCEE”) today announced that it has executed a Share
    Purchase Agreement to acquire 100% of Trivantage Holdings Pty Ltd (“Trivantage”) from the current
    shareholders of Trivantage for an enterprise value of up to $53.5m on a debt free basis. Completion is
    expected to occur in mid-December 2020.
    With over 50 years of operational experience, Trivantage is a leading provider of specialised electrical
    services across a range of sectors. Trivantage is characterised by a large degree of recurring service and
    maintenance work with a relatively low risk contracting profile. Headquartered in Melbourne, Trivantage
    has approximately 400 employees Australia-wide with offices in Victoria, Western Australia, Queensland,
    New South Wales, South Australia and Tasmania.
    1
    Refer Appendix for detailed transaction terms, including nature and timing of acquisition consideration
    2
    On a full year basis and excludes potential synergies, transaction and integration costs
    3
    Before synergies, transaction costs, integration costs and amortisation of customer related intangibles
    Southern Cross Electrical Engineering Limited ABN 92 009 307 046
    Trivantage has a proven track record servicing leading Australian corporations and government bodies
    across a variety of markets including commercial, supermarkets, public infrastructure, defence, resources,
    custodial, telecommunications & data centres, health & aged care, as well as energy and utilities. Of
    particular note, Trivantage has a strong and strategic focus on recurring service and maintenance work with
    around 70% of Trivantage’s revenue derived from its existing relationships, service and maintenance
    contracts or as an approved contractor.
    Trivantage operates through three specialist divisions:
     S.J. Electric – one of Australia’s leading providers of electrical solutions to the commercial and retail
    sector, specialising in maintenance, refrigeration and light and power. Primarily focused on servicing
    leading Australian supermarkets, retailers and facilities management companies
     SEME Solutions – a national supplier of electronic security services and solutions, specialising in the
    installation and maintenance of CCTV, Access Control, Intruder Detection, Nursecall and Duress
    Systems
     Trivantage Manufacturing – leading designer and manufacturer of premium quality switchboards for a
    broad range of end-users
    In FY20 Trivantage had an audited statutory revenue of $116m and profit before tax of $8.2m. Trivantage is
    budgeting to deliver FY21 revenue of circa $130m and a normalised EBIT of $10.8m. The high degree of
    recurring service and maintenance and current order book of over $60m will support strong earnings
    growth into FY22.
    Strategic Rationale
    The acquisition of Trivantage is consistent with SCEE’s strategy and will deliver significant benefits for
    shareholders including:
    Aligned operating model – strategically aligned business model and complementary focus on electrical
    services
    Diversification benefits – further diversification across sectors, customers and geographies delivering
    deepening exposure to commercial and social infrastructure markets
    Cross-selling opportunities – potential synergies and opportunity to further leverage the combined group’s
    customer relationships and skills. Additionally, Trivantage’s in-house high-quality switchboard
    manufacturing capability provides an opportunity to recapture margin and provide a more integrated
    offering
    Recurring services and maintenance – provides SCEE with greater recurring services and maintenance
    revenues and capabilities
    Enhanced scale and relevance – significantly enhanced scale and geographic coverage with combined proforma FY21F revenue of circa $500m
    Highly experienced management team and cultural fit - strong incentive structure and ongoing alignment
    underpinned by acquisition earn-out structure
    Financial benefits – immediate and significant pro-forma EPS accretion

    Southern Cross Electrical Engineering Limited ABN 92 009 307 046
    Summary of Transaction Terms
    SCEE will pay the vendors of Trivantage consideration of up to $53.5m on an enterprise value and debt free
    basis and the detailed transaction terms are set out in the Appendix.
    The acquisition consideration represents EBIT multiples (based on Trivantage’s current FY21F forecast EBIT
    of $10.8m) of:
     3.8x FY21F EV/EBIT assuming achievement of Trivantage FY21 EBIT of at least $10.1m and before
    potential payments in FY22 and FY23;
     4.5x FY21F EV/EBIT assuming Trivantage maintains EBIT of at least $10.1m in each of FY22 and FY23;
    and
     3.7x FY23F EV/EBIT assuming Trivantage achieves earnings in FY22 and FY23 sufficient to receive full
    portion of outperformance earn-out consideration.
    Transaction Funding
    Cash payments to the vendors of Trivantage will be funded through SCEE’s existing cash reserves and
    operating cash flows post transaction.
    Summary of Combined Group and Financial Impact
    The combined group will have a geographically diversified portfolio of projects across Australia, with
    approximately 45% of FY21 proforma budgeted revenues generated from NSW & ACT, 30% from WA, 15%
    from Queensland & NT and 10% from Victoria. Revenue will also continue to be widely spread across SCEE’s
    three core sectors, with approximately 45% of FY21 proforma budgeted revenue from commercial, 30%
    from resources and 25% from infrastructure.
    The combined pro-forma order book at 30 June 2020 would have been just over $500m.
    The acquisition of Trivantage is expected to be immediately EPS accretive with strong double digit proforma FY21F EPS accretion4
    (based on Trivantage FY21F EBIT of $10.8m and FY21F broker consensus
    estimates for SCEE5
    ).
    CEO Commentary
    Commenting on the transaction, SCEE’s CEO Graeme Dunn said “I am delighted to announce this
    acquisition. Trivantage presents for SCEE a transformational change in the breadth and depth of the
    group’s recurring, services and maintenance offerings. The acquisition will give us many cross-selling
    opportunities and synergies across our respective client bases and, in particular, through Trivantage’s
    switchboard manufacturing capability.
    There is a great cultural fit between the two organisations and I am looking forward immensely to working
    with the Trivantage team to take advantage of the opportunities in our markets.”
    Advisers
    Investec Australia Limited is acting as corporate adviser, EY is acting as financial and tax due diligence
    adviser and K&L Gates is acting as legal adviser to SCEE on the acquisition.
    4
    Before synergies, transaction costs, integration costs and amortisation of customer related intangibles
    5
    On a full year basis and excludes potential synergies, transaction and integration costs. SCEE broker consensus as at
    16 November 2020 and sourced from S&P Capital IQ
    Southern Cross Electrical Engineering Limited ABN 92 009 307 046
    Appendix - Detailed Acquisition Terms
    Acquisition  Acquisition of 100% of Trivantage Holdings Pty Ltd
     Due diligence finalised
     Completion is expected to occur in mid-December 2020
    Consideration Up to a total of $53.5m payable as follows:
    1. Deal Completion Initial Cash Consideration
    $25.0m in cash at completion
    2. FY21 Results Confirmation Payment
    Following confirmation that Trivantage’s FY21 EBIT is equal to or greater than
    $10.1m:
    a) $10.0m in cash; and
    b) $5.5m in SCEE shares (refer further details below)
    If Trivantage’s EBIT is less than $10.1m for FY21, elements (a) and (b) are both
    reduced on a pro-rata basis to nil at EBIT of $4.0m. If Trivantage’s FY21 EBIT is
    greater than $10.1m, the incremental EBIT above $10.1m will be added to FY22
    EBIT for the purpose of calculating the earn-out consideration in that period
    3. Earn-out: Deferred Consideration
    a) $4.0m in cash if Trivantage’s EBIT result for FY22 is equal to or greater than $10.1m
    b) $4.0m in cash if Trivantage’s EBIT result for FY23 is equal to or greater than $10.1m
    To the extent that EBIT is below $10.1m in either FY22 or FY23, the Deferred
    Consideration payment in that year would be calculated based on the following
    formula reducing the payment to zero: $4.0m less 5 x ($10.1m less actual EBIT)
    4. Earn-out: Outperformance Consideration
    a) Up to $1.7m of cash payable if Trivantage’s EBIT result for FY22 is equal to or
    greater than $11.4m. Reduced on a pro-rata basis down to nil at EBIT of $10.1m
    b) Up to $3.3m of cash payable if Trivantage’s EBIT result for FY23 is equal to or
    greater than $14.4m. Reduced on a pro-rata basis down to nil at EBIT of $10.1m
    Terms of SCEE Share
    Issue
     SCEE shares issued under FY21 Results Confirmation Payment will be ordinary fully
    paid shares in SCEE
     Shares issued at the VWAP over the 10-trading day period commencing 5 trading
    days before announcement
     50% of SCEE shares will be escrowed for 12 months from completion, with the
    remaining 50% escrowed for 24 months from completion
    Ongoing Vendor
    Involvement
     Vendors that are currently executives of Trivantage will continue in their same
    executive roles with SCEE post-completion
     Paul Chisholm (significant shareholder of Trivantage with 24.8% ownership prior to
    SCEE acquisition and current Chairman of Trivantage) to be invited to join the SCEE
    Board
    Condition Precedent
    to Completion
     Completion of the transaction is only conditional on there being no material
    adverse change in the period prior to completion
    This announcement lifts the trading halt on the Company’s securities.
    Authorised for release by Graeme Dunn – SCEE Managing Director

    courtesy of Bell Direct
    ==============================================================================

    DYOR

    i hold SXE

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