The WiseTech Global Ltd (ASX: WTC) share price is in focus as the ASX tech share revealed a US$414 million deal.
WiseTech is the developer of the global CargoWise software which enables logistics execution around the world. Customers include 41 of the top 50 global third-party logistics providers and 24 of the 25 largest global freight forwarders.
WiseTech acquires Blume Global
The business announced the acquisition of Blume Global for US$414 million. WiseTech will fund US$134.8 million of it from existing cash, US$155 million of debt from new facilities and US$155 million of debt from new facilities and US$124.2 million of new WiseTech Global shares to be issued to the vendors.
The ASX tech share expects to have available liquidity after deal of approximately $400 million from existing cash reserves and undrawn debt facilities in addition to “ongoing strong free cash flow generation.”
WiseTech described Blume as a provider of a leading solution that facilitates intermodal rail in North America.
The ASX tech share pointed out that North America is the world’s largest domestic logistics region, and Blume manages intermodal containers and chassis on behalf of six of the seven ‘class 1’ US railroads, ocean carriers and other intermodal equipment providers.
What’s the attraction?
Aside from having quality customers, WiseTech noted that Blume is a high-growth recurring revenue business and is expected to generate revenue of between US$65 million to US$70 million in FY24, which would be growth of between 45% to 55%.
Before operational synergies, on a standalone basis, Blume expects to achieve FY24 EBITDA (EBITDA explained) margins of approximately 10% and be cash flow breakeven by the end of FY24. It could be beneficial for the WiseTech share price if it keeps growing strongly.
Management commentary
The founder and CEO of WiseTech Global, Richard White, said:
This is another strategically significant acquisition that follows our acquisition of Envase Technologies last month. It further extends our capability in one of our six key CargoWise development priority areas, integrating rail into our landside logistics offering in North America, the most complex and largest logistics region in the world. Blume also brings significant new talent, a portfolio of other valuable product capabilities, and further enhances our product development skill set.
This transaction demonstrates WiseTech’s continued investment in its CargoWise ecosystem, improving visibility and process efficiencies end-to-end across the supply chain for our customers.
Final thoughts on the WiseTech share price
With how WiseTech described the business, it seems to make a lot of sense to add it into the existing portfolio.
I think it’s clever of WiseTech to pay for some of the acquisition price with shares because of the high price/earnings ratio (p/e ratio) that the business trades at.
I wouldn’t say WiseTech looks like a buy today due to the valuation and elevated interest rates, but it seems to be doing all the right things for long-term growth.
