The Dicker Data Ltd (ASX: DDR) share price is on watch after announcing expansion in New Zealand with Exeed.
Dicker Data’s New Zealand acquisition
Dicker Data is buying Exeed Group, which operates in both Australia and New Zealand. It will make Dicker Data NZ the second largest IT distributor in New Zealand with estimated revenue of over NZ$500 million for the combined entities.
Exeed has a strong market share across a number of the vendors that it represents. Dicker Data NZ will be able to challenge the largest distributor using a mixture of unique local market knowledge and access to an increased range of world leading brands, according to management.
Including the operations in Australia (started in 2016), Exeed has total revenue of around NZ$380 million, with FY21 ‘normalised’ EBITDA (EBITDA explained) expected to be approximately NZ$15 million. Around NZ$70 million of the revenue total is generated in Australia, across a vendor base that has no overlap with existing Australian vendors.
The purchase price is $68 million on a cash free and debt free basis. The deal is being funded by debt. It expects the transaction to complete before the end of August 2021. The company expects the transaction to add to earnings in FY21.
What things does Exeed distribute?
It distributes brands like Apple, HP, Hewlett Packard Enterprise and Microsoft, serving both commercial and retail sectors. It has a number of exclusive ‘distributorships’ in New Zealand including Motorola, Ruckus and Webroot.
Management comments
Dicker Data Chair and CEO David Dicker said: “After many attempts, over more years than I can count, we have finally got a deal done to acquire Exeed. This transaction will put us as a very strong number 2 in NZ, with a platform for number 1. The combined companies are highly synergistic. The deal done will be all cash. A very satisfying outcome.”
Summary thoughts on Dicker Data and the share price
The company has done very well in recent years. Businesses need to continue to invest in their IT to achieve the best efficiencies and performance.
But I’m not sure if it’s good value today or not. It’s hard to know if it can continue to maintain this strong profit (and more), or whether it’s a once-off COVID boom. For now, there are other ASX growth shares I’d prefer to buy.
