ATS Corp T.ATS

TD

[retiredcf]

Have a $70.00 target. GLTA

ATS Corporation

(ATS-T) C$57.57

Acquisition of Avidity Adds to Life Sciences Platform Event

ATS announced the acquisition of Avidity Science LLC. The company is hosting a conference call at 8:30 a.m. ET. Dial-in: 1-888-390-0546.

Impact: SLIGHTLY POSITIVE

• Avidity is a designer and manufacturer of automated water purification systems for biomedical and life sciences applications, and the deal should be additive to ATS' life sciences platform, the company's largest business segment, which is dominant in: 1) medical devices; 2) diagnostics; 3) pharma/radiopharma; and 4) pharmacies/labs.

• The purchase price is US$195mm (C$265mm), which corresponds to 11.2x Avidity's projected CY2023 adjusted EBITDA or 10.3x when adjusted for ATS' expected cost and commercial synergies, both multiples that are below where ATS is currently trading at 14.3x EV/F2024 EBITDA (consensus).

• Avidity had an ~20% adjusted EBITDA margin in CY2022; therefore, the acquisition should be accretive to ATS's adjusted EBITDA margin of 15.6% in F2023. Furthermore, ~40% of Avidity's revenue is recurring in nature, which will be additive to ATS's current mix of recurring revenue, which stands at 25%-35% of total revenue. Avidity's recurring revenue includes the sale of consumables, SaaS, and aftermarket service/support.

• Avidity was founded in 1969 and is based in Waterford, Wisconsin. The company employs ~380 people across six facilities in the U.S., the U.K., China, and Japan.