TD dilution solution Impact: MIXED
We welcome the lack of dilution that pulling the offering brings, but given
the company's track record of acquisitions we had expected the proceeds to
be accretively deployed. We have reduced our assumed acquisition spending
(now $100mm in total over 2016/2017 versus $110mm previously), which
has been more than offset by the lack of near-term dilution. We maintain
our BUY rating with our 12-month target price intact at $11.00.
TD Investment Conclusion
We continue to like underlying growth story at DHX and the noise of this
offering, or lack thereof, has done little to change our bullish stance.
With net debt/EBITDA expected to be well under 3x by year-end we believe
the company will have ample cash to fund internal growth initiatives and
further acquisitions. We see leverage trending to below 2x in 2017, even
with $100 million of forecast acquisitions.
Details
DHX management has decided to forgo its previously announced offering
(July 6th), with the release suggesting "that current market conditions are not
conducive for an offering on terms that would be in the best interests of
DHX's shareholders." With no imminent cash needs, and the shares down 9%
since the offering was announced we are supportive of management's
decision to withdraw the deal.