Pacific Environment (ASX:PEH) has entered into a binding agreement to purchase the New South Wales based environmental services business, DLA Environmental.
Total consideration to be paid is $918,000 which represents 3x target earnings before interest and tax.
The initial cash payment will comprise 40% of the total consideration and the remainder will be made across two equal annual instalments.
Target EBIT has been determined by a normalised weighted average of the last three years’ performance. Upside and downside EBIT based payment triggers are in place that may increase or decrease the total amount of deferred payments.
The acquisition will be funded by a mixture of internal cash reserves and bank debt.
DLA offers strong and growing profitability as demonstrated over the last three years, potential for cross-selling of service offerings across both organisations’ client bases, and national expansion of the DLA business.
DLA will use the PEH back-office systems, which allows for operational cost savings.
The transaction is expected to be completed in early October.
DLA is a long-standing environmental business based in Sydney and Maitland specialising in contaminated land assessment and remediation projects.
PEH is also currently in discussions with a number of other groups for possible acquisition and expects to make further announcements before the end of the year.
The company is valued at around $7 million.
