The consideration is US$85mln, which is 2.3 times Dharmacon revenues but more importantly Horizon has acquired complementary products and a platform with real potential to exploit.
“We see the strategic rationale, we believe it can be transformational, but will want to see more delivery on specific revenue synergies before putting through any significant revenue or valuation upgrades (particularly as Horizon picked up the business so cheaply in our view).”
Shares surged on the news of the deal, but if management can combine both entities successfully there is greater potential from the whole than the parts.
Dharmacon has seen top line revenue decline but Horizon management are confident on ‘mid to high single digit revenue’ in 2017 and given the potential for sales synergies Dharmacon's top line revenues can rise by 6% annually.
The risk is the promise may take some time to deliver, hence a hold rating though the broker’s price target rises to 245p from 220p.
Shares today were 257p, up 2%.