Sepura (SEPU) has agreed to acquire digital-radio rival Teltronic for €128m (£93.7m). Management thinks combining Sepura's robust and feature-rich radios - used by police officers, paramedics and other professionals - with Teltronic's network infrastructure and software could prove irresistible to customers. The group is funding the deal through a loan facility, placing and open offer.
Previous acquisitions have paid off. The purchase of 3T Communications in 2012 and Portalify in 2013 opened up the network infrastructure and app development markets respectively. That helped Sepura grow revenue by an estimated 11 per cent to €130m in the year to 27 March, and achieve a record order book.
Aside from strong growth, Teltronic's main appeal may be that it earns over four-fifths of its sales in Latin America and North America, complementing Sepura's focus on Europe, the Middle East and Africa. Moreover, a deal promises to more than double the proportion of Sepura's revenue earned in the lucrative transportation market, to 13 per cent.
Sepura's management expect a tie-up to generate €3m in full-year cost savings, offset by €1.9m in one-off integration costs. The addition of Teltronic's customers may also open up cross-selling opportunities and bolster demand for batteries, replacement parts and accessories. And greater scale could open the door to larger projects and steeper discounts from suppliers.
Broker Panmure Gordon expects to lift its full-year EPS forecast by about 9 per cent to 12.4¢ (9.4¢ in 2015).
