A leading traffic management operator AVADA (ASX: AVD) has gotten the green light to enter the New Zealand market having entered into a binding agreement to acquire Wilsons, the largest traffic management company in New Zealand’s South Island.
The purchase price for the acquisition includes a cash payment of $8.8 million (subject to customary working capital adjustments) funded through a combination of New Zealand bank debt of $6.8 million and cash reserves, as well as existing facilities, of $2 million. It also comprises an additional retention cash payment of between $1.29 million and $3.8 million—depending on whether Wilsons achieves certain performance hurdles—payable a year after completion.
AVADA Group Chief Executive Officer and Managing Director, Daniel Crowley, commented, “Wilsons Traffic Management gives us a solid foothold in the New Zealand market with a business that is well-managed and recognised as a market leader. Integrating Wilsons into AVADA will deliver cost synergies and support organic growth and introduce us to new acquisition opportunities in this attractive market.”
Wilsons reported a normalised EBITDA of $3 million in CY22, derived predominantly from road maintenance, civil construction and asphalting projects. The company employs over 115 traffic controllers and has a fleet of 75 vehicles (38 utilities, 37 trucks) pulling in hefty paychecks.
Wilsons Traffic Management was established in 2020 by vendors, Sam Wilson and Gabby Krauze. The duo will continue to manage the business after the transaction. Wilson has been involved in traffic management on the South Island for over a decade. Its head office is in Christchurch, New Zealand’s largest city, with traffic management operations in Nelson and Queenstown.
The Wilsons agreement also sets the stage for further acquisitions for AVADA.
After incurring a loss of $4.5 million in H1 FY23, the Company’s outlook for the second half remains positive. It hopes that the pipeline of infrastructure investments planned by State and Commonwealth governments in Australia and its exposure to the New Zealand market will give its financials a boost.
AVADA highlighted that its revenue momentum is picking up after the usual seasonal effects experienced during the January holiday period. The Company continues to focus on improving performance and achieving cost savings by transitioning the business and new acquisitions to a centralized operating and management structure.
The acquisition of Wilsons is expected to be earnings accretive. In addition, AVADA foresees cost synergies by integrating Wilsons and streamlining back-office operations, which could potentially create new career opportunities for employees within the Group and its key markets. Despite the integration, Wilsons will retain its current brand, which reflects its established position as a market leader.
The acquisition is set to be finalised on or around April 28, 2023, subject to the satisfaction of certain conditions precedent that requires a limited set of third-party consents to be obtained for the change in control of Wilsons.
Alinda is a Business Reporter for The Sentiment
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