Just Released: Bullish Raymond James Note Transaction of ITS firm at scale at 20X EBITDA. Could someone go hostile on our ITS business?
Roper TransCore Divestiture Implications For QTRH
Roper Technologies’ Divesture of TransCore. This weekend, Roper announced it will divest its third-largest business, TransCore, the leading smart city solutions company, to ST Engineering. The takeout is valued at $2.68 billion or ~20x RJA’s EBITDA estimate (ROP | Upgrading to Strong Buy - More ROP a Good Thing After Major Divestiture dated October 4, 2021). The transaction is expected to close by the end of 1Q22.
Implications for QTRH: 1) Quarterhill paid ~10-12x EBITDA for ETC (tolling software & services providers, came with a US$4 bln pipeline). This compares favourably with the multiple paid for TransCore and other smart city transactions (~17x EBITDA); 2) In our IOC for QTRH (Reinvented — ETC Was Worth The Wait dated August 25, 2021), we valued WiLAN at ~$167 mln (or $1.45/ QTRH share) which leaves the rest of QTRH (i.e. ITS) trading at a low 5x EBITDA — an inexpensive option on the largest, growing part of QTRH in front of a massive infrastructure bill in the US and especially given multiples seen in the ITS space (e.g. TransCore).
About TransCore. TransCore focuses on Tolling, ITS, and RFID. It collects and processes more than US$7 bln in annual toll revenues (global). For reference, QTRH/ETC collects US$3 bln+ (US only) and growing. In ITS, Transcore manages more than 30,000 intersections worldwide. With RFID, the company supports tolling facilities, airports, hospitals, parking garages, border patrols, trucking fleets and rail industry.