Brady Corporation ( BRC Quick Quote BRC - Free Report) announced that it acquired Salt Lake City, UT-based The Code Corporation. The transaction value was $173 million. Notably, the buyout is Brady’s third acquisition in the fourth quarter of fiscal 2021 (ending July 2021). Code is a specialist in manufacturing and providing barcode scanners (both handheld and hands-free) as well as related software. It has a strong presence in the healthcare industry of the United States and expanding footholds in the industrial markets. It employs 100 people. Inside the Headlines
As noted, Brady intends on settling the acquisition price of $173 million through available cash and funds raised through its revolving credit facility.
The buyout is anticipated to strengthen Brady’s presence in the industrial track-and-trace arena. In the quarters ahead, the buyout along with Brady’s research and development initiatives will help in extending the company’s businesses in the Americas, Asia and Europe. For fiscal 2022 (ending July 2022), Brady anticipates the Code buyout to generated revenues of $50 million and earnings before interest, tax, depreciation and amortization (EBITDA) of $10 million. The acquired Code business will be integrated with Brady’s ID Solutions segment. The segment generated revenues of $218.1 million in the third quarter of fiscal 2021 (ended April 2021), representing growth of 12.96% from the year-ago quarter. Other Buyout Activities
We believe that the above-mentioned transaction is consistent with the company’s policy of acquiring businesses to gain access to new customers, regions and product lines.
In addition to the above-mentioned buyout, Brady acquired the U.K.-based Magicard Limited for $59 million and Finland-based Nordic ID Oyj for $13 million in the fourth quarter of fiscal 2021. Brady’s Magicard buyout is expected to boost the company’s offerings related to encoding and rigid-card printing. Revenues of $35 million and EBITDA of $4 million are anticipated from this buyout in fiscal 2022. Then again, the Nordic ID acquisition is expected to enhance Brady’s RFID product offerings. Notably, this buyout is expected to generate revenues of $11 million in fiscal 2022, while EBITDA is predicted at the break-even level. It is worth mentioning here that Brady anticipates Magicard, Nordic ID and Code acquisitions to boost revenues by $11 million in the fourth quarter of fiscal 2021. On earnings, the impact is expected to be minimal from the buyouts. Zacks Rank, Price Performance and Estimate Trend
Brady currently carries a Zacks Rank #3 (Hold). The company is poised to benefit from its solid product offerings, buyout activities, shareholder-friendly policies and growth investments. However, rising costs of sales and persistent challenges in end markets are concerning.
In the past three months, the company’s shares have increased 1% compared with the industry’s growth of 7.3%.
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The Zacks Consensus Estimate of Brady’s earnings is pegged at $2.65 per share for fiscal 2021 (ending July 2021) and $2.90 for fiscal 2022 (ending July 2022), suggesting growth of 3.1% and 1.8% from the respective 60-day-ago figures.