The Environmental Group Limited (ASX:EGL) signed a binding agreement to acquire Airtight Pty Ltd for AUD 12 million on April 18, 2023. The consideration is upfront consideration of AUD 7 million, plus contingent consideration of up to AUD 5 million dependent on FY24 earnings, on a cash and debt free basis. The purchase price is based on delivery of AUD 4 million in working capital, which is subject to a post completion adjustment.

Implied acquisition multiple of 4.0x forecast FY23 normalised EBITDA based on initial purchase price. EGL will undertake an equity capital raising of up to AUD 9 million, comprising a placement to raise AUD 8 million (“Placement”) and a subsequent Share Purchase Plan to raise up to a further AUD 1 million. Proceeds from the Placement and SPP will be used to support the acquisition and growth of Airtight.

Under the Placement, EGL will issue approximately 40 million new EGL shares at an issue price of AUD 0.20 each. The transaction is subject to satisfaction of conditions precedent, including, but not limited to, the receipt of all necessary consents, waivers and approvals and the receipt of subscriptions by EGL under the Placement. Completion of the transaction is scheduled to occur on May 1, 2023.

Acquisition of Airtight is expected to be more than 15% EPS accretive to EGL shareholders on forecast FY24 pro forma earnings. Taylor Collison Limited and Bell Potter Securities Limited are acting as Joint Lead Managers and Bookrunners to the Placement and SPP. Acacia Partners is acting as Sole Financial Adviser and MST Lawyers as legal adviser on the acquisition.