Debt-free Gentrack would look at acquisitions up to $20M after IPO
By Jonathan Underhill
May. 26 (BusinessDesk) - Gentrack Group, the utility and airport software company going public next month, would look at acquisitions of up to $20 million to add compatible software or enter new markets after an initial public offering that will leave it debt free and allow the owners to sell down their holdings.
The Auckland-based company counts Genesis Energy, Meridian Energy, MightyRiverPower, Australia's Origin Energy and the UK's SembCorp Bournemouth Water among the electricity and water utility customers for its Gentrack Velocity billing product. Airport companies that use its Airport 20/20 management system include Auckland International Airport, Sydney Airport, Hong Kong International Airport and John F Kennedy International Airport.
It competes with SAP and Oracle for utility billing systems and with Lockheed Martin, SITA and AirIT for airport systems, according to the prospectus released today. It plans to use existing earnings to expand into new countries and markets and has been monitoring some smaller companies as potential acquisition targets "for some time," executives said on a conference call.
"Given its strong balance sheet, Gentrack retains the ability to take on debt to fund acquisitions," the company said. That may include a billing company in the US, for example, and could be funded by a mix of cash and debt.
Gentrack took on debt to fund the $54 million management buyout in 2012 that resulted in chairman John Clifford and executive director James Docking each hold 21 percent of the company, which currently has a total of 21 shareholdings. The $33 million debt component of that transaction plus costs associated with the IPO will use all of the proceeds of the sale of new shares, about $36 million. After the IPO, the existing owners will hold between 41.5 percent and 43.5 percent of the company, receiving the balance of the up-to $101.8 million the sale will raise.
The shares will be offered at an indicative price range of $2 to $2.50, valuing the Auckland-based company at between $151.4 million and $180.2 million, according to Gentrack's prospectus. The offer will comprise 14.4 million to 18 million of new shares and 26.3 million of existing shares. The bookbuild, pricing and allocation will be determined on June 5 for an offer that will open on June 9 and close on June 20, ahead of an expected June 25 listing on the NZX and ASX.
Gentrack has an implied cash dividend yield of 1.4 percent to 1.7 percent for 2014, rising to 4.5 percent to 5.4 percent in 2015, according to the prospectus. According to its forecasts, revenue rises to $40.6 million in 2014 from $40.1 million in 2013, before climbing to $44.7 million in 2015. Net profit would be $3.7 million this year and $9.3 million in 2015.