Refocus at EKT a boost for shareholders
Private equity strikes again with the announcement today of the purchase of Bulgin from Elektron Technology for £105m, or £94m after costs and deal fees. This looks like a pretty decent price when you consider this is more than the market cap of the whole of Elektron and they are selling around 75% of sales with this disposal.
The transformation at Elektron that started a few years ago has seen the company reduce from 15 businesses down to just two presently and the smallest one of these (Elektron Eye Technology) is also up for sale. Today’s announcement effectively means that the company is a pure SaaS player in the area of operations management.
After the £94m proceeds of the sale are offered to shareholders via tender offer later this year, the net cash position of the newly named Checkit plc will look in a strong position for reinvestment for growth and further acquisitions.
Back in May this year EKT bought Next Control Systems on multiples more reflective of an industrial versus the core SaaS company that Next Controls offers. Combine this latest value acquisition with a strong end of year cash position of potentially £8-15m depending on shareholder appetite for the tender offer, then there is room for Keith Daley the Executive Chairman to comfortably reinvest for growth and potentially hunt for further inorganic opportunities.
Keith has turned EKT from a sub £1m market cap venture into a strategically placed forward looking growth proposition with a market cap today over £100m. Recently that performance has been driven by Bulgin and the sale crystallised that value.
Going forward, the Checkit/Next combination has great potential and if they can recreate the margin and growth performance experienced at Bulgin then the future could look bright. Watch this space.