EARNZ buys Gem Environmental for £24 million as loss widens
What's the deal? UK energy services company EARNZDealroom has a profile for this one. Try Dealroom → is acquiring certain assets of GEM Environmental Building Services for up to £24 million ($31.3 million). Gem, based in central London, has been a building maintenance contractor since 1999, serving local authorities, social landlords, schools, and commercial buildings.
The terms: Initial consideration of up to £10 million will be paid as £4 million in cash, £2 million in loan notes, and £4 million in shares. Deferred consideration of up to £13.6 million will be settled 80% in cash and 20% in cash or shares.
How EARNZ is funding it: The Cheltenham-based firm is raising £4.1 million via a placing and up to £1.0 million through a retail offer, both at 4 pence per share. It is also issuing a convertible loan note of up to £700,000 to Gresham House Asset Management and has agreed a £5.0 million revolving credit facility with HSBC.
The numbers: EARNZ's pretax loss widened to £2.0 million in the six months to June 30, from £372,000 a year earlier. Revenue nearly doubled to £8.4 million from £4.7 million, but administrative expenses more than doubled to £3.9 million.
What's the endgame? EARNZ, which focuses on decarbonisation, expects the deal to significantly lift Ebitda and cash generation. On completion, the enlarged group's pro-forma revenues should exceed £50 million, with at least £20 million from Gem.
Why now? EARNZ pointed to a pickup in orders after political uncertainty eased. "We have seen an increase in orders that had previously been delayed and remain confident of serving these 'late' orders to reflect the profitable outcome for the year," the company said.
The signal: A loss-making scaleup is betting on acquisition to reach scale, doubling revenue and stacking debt, equity, and loan notes to fund a target larger than parts of its own business.
Read more: marketscreener.com
Image credit: USACE Afghanistan Engineer District-South
