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Public transport operator SeaLink Travel Group (ASX: SLK) is showing no signs of putting on the brakes anytime soon, building on a successful year with the planned purchase of one of the largest specialist bus operators servicing the Western Australian resources sector.
As an integral part of maritime traffic in Sydney Harbour, the Brisbane River and the Rottnest Channel, SeaLink hauls in most of its revenue from government clients, demonstrating a kind of stability that is also clear in today's announced acquisition of Go West Tours.
The acquisition gives the target company an enterprise value of $84.7 million plus an earn-out component of up to $25 million, with expectations the deal will be completed in early July.
"The acquisition of Go West provides SeaLink with a unique opportunity to expand into a new market that is highly complementary to our existing Australian bus transport capabilities," says SeaLink's Group chief executive officer Clint Feuerherdt.
"Go West has valuable contract counterparties and delivers an essential service for these clients. The operations of Go West were unaffected by the COVID-19 pandemic and continued at near 100 per cent levels throughout, keeping their communities and worksites connected."
Founded more than 35 years go, Go West has 181 employees and 287 buses across nine depots in Western Australia. In recent years the company has enjoyed strong growth winning multi-year contracts with leading mining companies and other regional services such as school bus transfers.
SeaLink has forecast the acquisition, to be funded from existing cash reserves and existing undrawn senior debt facilities, will be high single-digit earnings per share (EPS) accretive in the first full year. The Western Australian transport company made $46.2 million in revenue in the 12 months to 30 September 2020, and has an attractive tender pipeline of new contract opportunities in the state.
The deal requires an upfront consideration of $72.4 million payable on completion - just slightly less than its underlying earnings of $73.7 million in FY20.
"The Go West team has built a high-quality business focused on providing great service whilst maintaining high safety standards for their clients," Feuerherdt says.
"Our intention is to retain the well-recognised and established Go West brand and continue to work with, and support, Go West's existing client base.
"We are very excited about the growth opportunities this acquisition provides SeaLink and look forward to welcoming all of Go West's employees to the Group."
The Adelaide-headquartered group notched record revenue of $570.8 million in the December half following the transformational acquisition of Brisbane-based Transit Systems Group in January 2020, with a 231.9 per cent rise in net profit after tax to $48.1 million.
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