TDCurrently have a $28.00 target but there's potential for that to be raised. GLTA
Lumine Group Inc.
(LMN-V) C$23.19
Announces Nokia Carve-out Acquisition for up to €185 Million
Event
Lumine has entered into a definitive agreement to acquire the Device Management
and Service Management Platform businesses from Nokia.
Impact: POSITIVE
Our take. Lumine is continuing its active M&A strategy, as it looks to take advantage
of an attractive M&A environment and its healthy deal pipeline. The company has
spent >$575mm on acquisitions this year (WideOrbit, Titanium, Synchronoss assets)
and the €150mm up-front purchase price for the Nokia businesses exceed our total
forecasted M&A spend for all of F2024 ($145mm). This deal helps support our view
that Lumine will be very active on the M&A front and should deliver strong, profitable
growth in the coming years.
Key details. Management indicated that the businesses are high quality, so we
assume Lumine paid a modest premium to its target valuation of 1x revenue (e.g.,
1.2x-1.3x multiple implies ~€115mm-€125mm in revenue, representing ~16%-17%
of pro-forma F2024E revenue).
Management also stated that the combined businesses have generated solid organic
growth and that it expects to utilize its playbook to get EBITDA margins to its 30%
target within the first year.
The purchase price is €150mm in upfront cash plus up to €35mm in a 1-year earnout.
To help fund the acquisition, we note that Lumine had $141mm in cash exiting Q3/
F23 and ~$60mm available under its credit facilities. We also expect the company
to increase its credit facilities to help fund its active M&A growth strategy.
~500 employees are expected to be transferred to Lumine. Closing is expected in
Q1/F24.
Acquisition overview. Nokia's Device Management platform primarily came from
the Motive acquisition in October 2008. Its software solutions help customers
remotely manage home broadband access devices and IoT sensors. Nokia's Service
Management platform mostly came from the acquisition of mFormation. Its offering
helps communications customers improve their customer care/service with >150
deployments worldwide and >1B devices under management.
Second carve-out deal with Nokia. Management has indicated that it is focused on
carve-outs (details here), which have historically generated higher IRRs compared
to owner/operator and PE/VC deals. These two carve-outs follow 12 prior carve-out
deals, which includes the carve-out of Velocix from Nokia in 2019.