Vysarn Acquires CMP Consulting, Expanding National Water Infrastructure and Services Offering

About Vysarn Limited

Vysarn Limited (Vysarn, the Group, ASX: VYS) is focused on the integration and development of water specialised services and technologies by designing, manufacturing, installing and maintaining wastewater and potable water plants. These activities cover hydrogeological drilling, test pumping, reinjection water services and water consultancy services. The Group services blue chip clients across the mining, oil and gas and industrial sectors, as well as municipalities and the large scale domestic urban development sector.

Transformative acquisition ensures long-term earnings growth

The acquisition of consulting engineering company, CMP Consulting Group (CMP), is key to diversifying the Vysarn’s Western Australian and resource sector centric single service business model to a vertical service offering with a national footprint.

Vysarn’s growth to date has been underpinned by providing water-related services to the iron ore sector in Western Australia. This is set to change in the months ahead following completion of the CMP acquisition.

CMP is a consulting engineering business based in Victoria and employs 92 professionals who are multidisciplinary experts in civil, construction, mechanical, process and electrical and asset management engineering. CMP’s core service focus is on the water industry through the design, construction and ongoing asset management and maintenance of water infrastructure assets.

CMP’s geographic focus is Australia’s most populous states, being the Eastern states of Australia, which are set for a once in a generation water infrastructure investment boom. More than $50 billion has been earmarked for investment in water infrastructure and projects on the East coast over the next 10 years.

The CMP acquisition will be funded by the issue of 95.5 million new shares at an issue price of 40 cents per share to raise $38.2 million. The new shares are being issued at a 15.8 percent discount to the Vysarn closing share price of 47.5 cents on 10 September 2024, which was the last trading day prior to the acquisition announcement.

Purchase consideration includes upfront cash of $24 million, and 10 million Vysarn shares. Further deferred consideration of up to 30 million Vysarn shares may be payable over 3 years, subject to CMP achieving agreed EBITDA targets. Based on CMP’s unaudited FY24 EBITDA numbers, the purchase price represents an Enterprise Value multiple of 4.6 times.

The CMP acquisition follows the purchase of Waste Water Services (WWS) for $7.5 million in cash at an Enterprise Value multiple of 3.27 times. This acquisition was announced on 30 August. The combined FY24 Net Profit After Tax results of both entities would deliver earnings per share accretion of more than 20 percent, on diluted earnings per share basis. Including the FY24 earnings of the WWS acquisition announced on 30 August 2024, the combined Vysarn, CMP and WWS proforma FY24 results would deliver earnings per share accretion of 35 percent, using Vysarn’s post capital raise and CMP upfront vendor consideration shares on issue.

Issue of Deferred Consideration shares

Completion of the CMP acquisition was originally set down for 31 October 2024. The transaction will now be completed in early December 2024, following shareholder approval for the issue of 30 million deferred consideration shares to the CMP sellers at the AGM on 21 November 2024.

Although the 30 million deferred consideration shares will be issued over three years subject to CMP achieving agreed EBITDA targets over this period, shareholder approval is required in advance of this binding commitment being provided to the CMP vendors.

Any shares issued as deferred consideration are subject to a 12-month escrow period. If Vysarn is subject to a change in control event during the three years earn out period, then the deferred shares not already issued will be issued to the CMP vendors.

The Future

Vysarn’s now diversified geographic and service offering through the CMP acquisition mitigates the operational and financial risk associated with a single service model confined to a single state and one industry sector. Moreover, the CMP acquisition provides Vysarn with an immediate national presence and a platform for significant long-term growth underpinned by a East coast water infrastructure boom.

The acquisition also provides a high-quality blue-chip client base comprising the major metropolitan and regional Victorian water authorities, major contractors, government departments, and interstate Councils and authorities.

Vysarn now has the capacity to deliver comprehensive water engineering solutions across the complete lifecycle of assets and projects, including potable water treatment and distribution, wastewater transfer and treatment, and resource recovery and recycled water treatment and distribution. The Group’s specialist capabilities extend to construction management of water infrastructure assets, which opens the door to establishing a water infrastructure asset management business.

The establishment of a water infrastructure asset management business has the potential to add significant shareholder value to the Group over the medium term.