Ascential PLC (LON:ASCL) shares rose on Thursday following news the tech firm is expanding in the US with the US$60mln cash acquisition of Flywheel Digital, a provider of managed services to consumer product companies trading on Amazon.
The FTSE 250-listed specialist information company said it was paying the consideration out of existing cash reserves using capital released from the sale of its exhibitions business.
READ: Ascential reports dip in first-half earnings amid restructuring to focus on digital
Flywheel primarily serves large-scale US consumer product companies, with more than 70 customers and more than 90 staff based in Baltimore and Seattle.
In the year ended December 2017, Flywheel saw a 150% surge in revenue and delivered unaudited profit before tax of $4.8m.
Ascential said the transaction is expected to be earnings accretive in the current financial year.
Duncan Painter, CEO of Ascential, commented: “The acquisition of Flywheel is in line with this strategy, further strengthening our offerings in eCommerce for brands navigating the digital marketplaces, particularly Amazon."
ShoreCap repeats 'buy'
In a note to clients, analysts at Shore Capital commented: “We are encouraged by this acquisition which, on a first pass basis, looks highly complementary to ASCL’s other digital assets and growing authority in this space.”
They added: “We will revert on its impact on our numbers following input from management but in the meantime, believe the group’s valuation (FY2018F and FY2019F P/E and DY ratios of 23.9x and 1.6% and 20.2x and 1.9% respectively) offers attractive upside potential.”
The analysts reiterated a ‘buy’ rating on Ascential shares, having upgraded from ‘hold’ on 16 October, and said they “would encourage investors to build exposure to this quality company at current levels.”
In early afternoon trading, Ascential shares were 6.6% higher at 401.60p.
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