LONDON: Cohort plc (AIM: CHRT), an independent technology group, has announced a conditional agreement to acquire the entire issued share capital of EM Solutions Pty Ltd, which includes EM Solutions (Europe) B.V., from Electro Optic Systems Holdings Limited (EOS).

The acquisition, valued at AUD$144.0 million (approximately £75.0 million), is subject to customary post-completion adjustments.

EM Solutions, based in Australia, is known for developing and producing high-end SATCOM terminals for global naval and defense customers. The acquisition will be funded through Cohort’s existing cash resources, debt facility, and a placement of new ordinary shares.

Once the acquisition is completed, EM Solutions will operate as the seventh stand-alone business within the Cohort Group, reporting through the Communications and Intelligence Division. The completion of the acquisition is expected by the end of the calendar year.

The acquisition aims to enhance and diversify Cohort’s offerings with a complementary defense communication solution. It will also provide Cohort with exposure to the naval surface vessel SATCOM market, which has strong growth drivers.

Additionally, the acquisition will broaden Cohort’s naval systems offerings and accelerate EM Solutions’ growth by enhancing its position in the UK, NATO Europe, Asia, and South America. It will also strengthen Cohort’s presence in Australia, a strategically important region for the group.

Financially, the acquisition is expected to be materially accretive to Cohort’s adjusted earnings per share (EPS) in the first full financial year of ownership (2025/26) and beyond. The tax-adjusted Return on Invested Capital (ROIC) is projected to exceed the Weighted Average Cost of Capital (WACC) by the third full financial year post-completion (2027/28). In the year ended December 31, 2023, EM Solutions achieved revenues of AUD$43.1 million and EBIT of AUD$11.5 million. As of September 30, 2024, EM Solutions had an order book valued at AUD$175.4 million (£91.4 million), bringing Cohort’s pro forma order book to over £650 million. After the acquisition is completed, Cohort’s pro forma net debt/EBITDA for the financial year ending April 30, 2025, is expected to be less than 1.0x, ensuring a strong balance sheet and liquidity.

Andy Thomis, Chief Executive of Cohort plc, commented: “The proposed acquisition of EM Solutions in Australia is highly complementary and is in line with our stated strategy to accelerate growth by making targeted acquisitions in the UK and overseas. Australia is an increasingly important strategic region, reflecting the increased security challenges in the Indo Pacific, and the creation of the AUKUS alliance.

EM Solutions represents a compelling opportunity to access the fast growing satellite communications market, further broadening the Group’s strong existing naval systems service offering, whilst bringing new customers and enhancing our combined position in the UK, NATO Europe, Asia and South America.

This is our largest acquisition to date, adding Cohort’s seventh standalone business and creating a materially larger Group. With the strong momentum being reported by Cohort and EM Solutions, together with the substantial combined orderbook, the Acquisition is expected to be materially enhancing to adjusted EPS in the first full financial year (2025/26) and onwards.

We are looking forward to welcoming the EM Solutions team to Cohort and working together to realise the multiple growth opportunities that this transaction affords.”

Andreas Schwer, Chief Executive Officer and Managing Director of EOS, commented: “Given the strengthening AUKUS partnership, we believe that Cohort is the ideal owner for EM Solutions and are confident the business will continue to strengthen under their stewardship.”