ATS Corp T.ATS

Alternate Symbol(s): ATS

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ATS Corporation is an automation solutions provider. It uses its knowledge base and global capabilities in custom automation, repeat automation, automation products and value-added solutions, including pre-automation and after-sales services, to address the sophisticated manufacturing automation systems and service needs of multinational customers in markets, such as life sciences, transportation, food and beverage, consumer products, and energy. It engages with customers on both greenfield programs, such as equipping new factories, and brownfield programs, including capacity expansions, production relocations, equipment upgrades, software upgrades, efficiency improvements and factory optimizations. It offers post-automation services. It offers artificial intelligence and machine-learning-based tools for industrial production. It designs and manufactures automated water purification solutions. It also manufactures lab equipment for the life sciences and pharmaceutical industries.

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Post by retiredcfon Sep 22, 2023 9:10am

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Post# 35648905

RBC

September 22, 2023

ATS Corporation
Announces acquisition of Avidity Science for US$195MM

TSX: ATS | CAD 57.57 | Outperform | Price Target CAD 69.00

Sentiment: Positive

What happened – ATS Corporation ("ATS") announced it has agreed to acquire Avidity Science, LLC ("Avidity"), a designer/ manufacturer of Life Sciences automated water purification solutions, for US$195 million (~C$265 million). This represents 11.2x Avidity's 2023E Adjusted EBITDA (10.3x including synergies) and compares to ATS' current trading multiple of 12.5x F2025E Adjusted EBITDA. For background, Avidity generated US$81.9MM of revenue (40% recurring) and a 20.4% Adjusted EBITDA margin (implying ~US$16.7MM of Adjusted EBITDA) in calendar year 2022. In CAD, this implies ~$110MM of revenue and ~$22.5MM of EBITDA (~4% and ~5% of our F2024 revenue and Adjusted EBITDA forecasts, respectively).

Synergies and pro-forma leverage – ATS expects to realize US$1.5 million of synergies by year 3 and US$2.6 million by year 5 post-close. The company will fund the acquisition with cash and by drawing on its revolving credit facility, and projects pro-forma leverage of ~2.5x. The transaction is expected to close in the fourth calendar quarter of 2023.

Conference call at 8:30am ET – On the 8:30am call today, we will look for additional colour on: 1) how the Avidity business fits within ATS' Life Sciences offering; 2) Avidity's recent revenue growth/margin trajectory and management's expectations for the coming years; and, 3) integration plans given Avidity has a global customer base.