Asseco has reported signing letters of intent to acquire companies in Romania and Serbia, whose publication has been delayed on purpose so as not to hinder the negotiations process.
Romanian acquisitions: Asseco has reported that on 5th December 2006 it signed a letter of intent to purchase two companies in Romania with headquarters in Bucharest. The letters of intent specify the timing of further negotiations and preliminary financial terms. Accor
ding to Asseco’s management, the final purchase agreement of the two Romanian companies should take place within the next three weeks. The combined revenues for 2006 of the two companies stand at EUR 27.5m (PLN 105m), while net earnings for 2006 stand at EUR 2.7m (PLN 10.3m).
Serbian acquisitions: Asseco has reported that on 27th February it signed a letter of intent to purchase two Serbian companies, with headquarters in Skopie and Belgrad. The letters of intent specify the timing of further negotiations and preliminary financial terms. Accor
ding to Asseco’s management, the final purchase agreement of the two Serbian companies should take place within the next three months. The combined revenues for 2006 of the two companies stand at EUR 16.1m (PLN 61.5m), while net earnings for 2006 stand at EUR 3m (PLN 11.5m).
Our view: We believe the news should have a strongly positive impact on Asseco’s share price, as it once again proves the deliverability of the management. It should also have some positive trading impact on Prokom
, parent company, that via consolidation will be a beneficiary of the acquisitions and according to Asseco’s statements should also participate in the acquisitions financially. We believe that Asseco will aim at purchasing some 49% stake in these companies, while Prokom
at acquiring the 21% stake.
In our model we have assumed the two Romanian companies to be consolidated from mid-year. These two companies add PLN 50m to our 2007 revenue forecast, constituting some 3.9%, and add some PLN 2.9m to our 2007 net earnings forecasts, constituting some 2.4%. To our knowledge, one company is a banking software house, while the other is an integrator. The Serbian acquisitions of the Serbian companies have not been included in our forecasts. We believe that it’s most likely that their consolidation is going to start from 4Q07. Therefore, these companies could add some PLN 15.4m of revenues to our 2007 forecast and some PLN 1.4m of net earnings. The impact on further years should be stronger.
The acquisition prices have not been given, yet we believe that Asseco will stick to its strategy of acquiring targets at average P/E of 10x. Therefore, assuming acquisition of 49% stakes, the 4 companies would imply a cash outlay of some EUR 27.9m (PLN 106.7m) outlay. We believe that the transactions are going to be financed out of the company’s own resources and debt.
We believe that there are more acquisitions to follow. It is Asseco’s target to create Asseco Romania out of 2-4 companies, with combined revenues for 2007 at some PLN 110-380m, and combined net earnings for 2007 at some PLN 12-21m. Therefore, some 2 more purchases could be expected. It is also Asseco’s plan to create Asseco Balkans out of 2-3 companies, therefore one more acquisition could be expected. Asseco estimates that the 2007 revenues of the Asseco Balkans could reach PLN 90-130m, while combined net earnings for 2007 could reach some PLN 14-18m. Both Asseco Romania and Asseco Balkans are to be floated on the WSE around 1Q08.