The Service Stream Limited (ASX: SSM) share price isn't going anywhere today. This comes after the essential network services provider entered into a trading halt early this morning on the ASX.
Looking at yesterday's market close, Service Stream shares last traded at 96 cents.
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Why did Service Stream put a halt on its shares?
In today's statement, Service Stream advised it is launching a capital raise to acquire 100% of Lendlease Services Pty Ltd.
A subsidiary of parent company, Lendlease Group (ASX: LLC), the Services business is a leading provider of essential network services across telecommunications, utilities and transportation sectors. This includes wireless and fixed-line network infrastructure, maintenance of electricity, water, and industrial assets, as well as roads and tunnels.
To fund the $310 million acquisition, Service Stream is seeking to undertake a capital raise of $185 million. This will consist of a $123.1 million fully underwritten 1-for-3 entitlement offer and a $61.9 million fully underwritten placement. All shares under the offer will be issued at 90 cents apiece, with approximately 205.6 million new ordinary shares being added.
The remaining $123 million shortfall for the transaction will be sourced from the company's expanded debt facilities and available cash.
Service Stream expects the takeover to be highly accretive to Service Stream shareholders. Earnings per share (EPS), excluding one-off costs are forecasted to increase by around 30% on an FY22 pro forma basis.
The combined group FY22PF (pro forma) revenue is forecasted to reach roughly $1.7 billion. Furthermore, earnings before interest, tax, depreciation and amortisation (EBITDA) for FY22PF is estimated to be $120 million to $125 million.
The acquisition has received pre-approval from the Australian Competition and Consumer Commission (ACCC) and is not subject to any further regulatory approvals.
Service Stream managing director, Leigh Mackender said:
The acquisition is highly complementary to Service Stream's existing business, expanding our utility operations, delivering an established transportation infrastructure division and enhancing Service Stream's contracted operations within the telecommunications sector.
The Acquisition will further diversify Service Stream's revenues, bolster the scale and depth of our operations and expand the Group's immediate and future addressable markets to support ongoing growth.
About the Service Stream share price
Over the last 12 months, Service Stream shares have failed to take off, resulting in losses of almost 50%. The company's share price is near its 52-week low of 83 cents reached in May.
Service Stream presides a market capitalisation of about $393 million, with 410 million shares currently on its books.
