Scidev Ltd - SciDev makes strategic ProSol Australia acquisition
Scidev Ltd (ASX:SDV)

SciDev makes strategic ProSol Australia acquisition

Published Oct 22, 2019

What happened?


What's Happened?

SciDev have made a strategic $1.9M acquisition of ProSol Australia, which is a bespoke engineering and chemistry company that provides services to the mining and water treatment industries in NSW.

Why is it a Strategic Acquistion?

The target market of ProSol Australia, which is the provision of tailings engineering and process chemistry to mining and water treatment industries in NSW, is also a target market for SciDev's OptiFlox technology. Thus, this will lead to greater market penetration for SciDev. In addition, SciDev is retaining key staff from the ProSol Australia business. This includes ProSol Australia Director Ben Gill with 18 years’ experience who will be joining the SciDev management team and engineer Terry McHugh who will join as a Technical Account Manager.

What are the benefits?

Not only will the ProSol Australia staff become a valuable part of the SciDev team, SciDev will also be able to leverage Nuoer Group's manufacturing capabilities to improve ProSol Australia's profit margins. The ProSol Australia business is expected to generate between A$2-$4m in revenues per year.

What were the terms?

The acquisition was funded via a combination of 55% cash and 45% ordinary shares across several tranches, which is shown below:

file

Managing Director's summary

Lewis Utting Managing Director of Scidev Ltd has provided a statement.
Lewis Utting
Lewis Utting
Managing Director, Scidev Ltd

“ProSol have an outstanding reputation in the industry and have an excellent customer base. The transition of the ProSol supply chain to SciDev will allow the company to utilise our strategic joint venture with Nuoer manufacturing, delivering additional margin upside on the existing ProSol revenue model. In addition, the acquisition provides the opportunity for greater market penetration of SciDev’s MaxiFlox® technology amongst ProSol’s existing customer base. Both Ben and Terry will slot straight into the SciDev team strengthening our ability to continue to execute on the rapidly growing SciDev business development pipeline."

Analysts thoughts

SmallCapInsider from Mawson Graham provides perspective on this recent announcement.
SmallCapInsider
Written by SmallCapInsider
Published Oct 22, 2019

This acquisition is highly complimentary to the existing SciDev business and will see its team strengthened during a time of expansion. Furthermore, although no detailed financial figures for the ProSol Australia business have been provided in this announcement, the acquisition price of A$1.9m relative to the expected revenues of A$2m-A$4m appears attractive on the surface, especially if margins are expected to improve at ProSol Australia.

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