Media group Ascential (ASCL) only nudged 0.5% higher to 422p on the $122 million acquisition of a majority stake in digital content optimisation play ASR Group, but the deal could have more significance than the share price move suggests over time.
Under the terms of the transaction, Ascential will take an initial 51% stake with an option to acquire two further 24.5% stakes in the company based on a pre-determined multiple of trailing earnings before interest, taxes, depreciation and amortisation or EBITDA between July 2022 and June 2025.
In the year ended December 2020 ASR recorded unaudited adjusted EBITDA of $9.1 million, which had grown to $13.6 million for the twelve month period ended 31 May 2021.
‘EXCITING NEW AREA OF EXPANSION’
‘ASR's expertise offers an exciting new area of expansion for the Digital Commerce Business Unit, building on our current offer by allowing us to directly connect professional independent content with brands' products at the point of purchase to enhance the impact of their advertising in the marketplaces', the company said.
Shore Capital analyst Roddy Davidson commented: ‘The addition of ASR, which follow April’s acquisition of Perpetua Labs (ecommerce media optimisation), looks highly complementary to the group’s increasingly authoritative offering in the fast-growing e-commerce analytics and support space - by adding the ability to directly connect professional independent content with brands' products at point of purchase.
‘The success of Ascential’s strategic pivot to digital and the potential to generate significant organic growth in this space (supplemented by add-on acquisitions) was clearly evident in its FY20A results. We also expect its live event brands to bounce back strongly when conditions allow.’
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