An eye on Experience

Following my recent post on Experience Co (EXP) formerly Skydive the Beach (SKB) there are further acquisitions announced in FNQ:

4 DECMEBER 2017

EXPERIENCE CO LIMITED (ACN 167 320 470)

(ASX: EXP)

ASX ANNOUNCEMENT

EXPERIENCE CO ANNOUNCES ACQUSITION OF BIG CAT GREEN ISLAND REEF CRUISES AND TROPICAL JOURNEYS

Experience Co Limited (‘EXP’, ‘the Company’, ‘Experience Co’), Australia and New Zealand’s leading adventure tourism company, is pleased to announce the acquisition of Big Cat Green Island Reef Cruises (BC) in Cairns, and Tropical Journeys (TJ) in Port Douglas, Far North Queensland.

Summary:

 Experience Co (ASX: EXP) has executed an agreement to purchase Big Cat Green Island Reef Cruises and Tropical Journeys;  BC is one of Far North Queensland’s leading Great Barrier Reef outer-reef operators, based out of Cairns;  TJ is one of Far North Queensland’s leading Great Barrier Reef inner and outer-reef operators, based in Port Douglas, and one of the most reputable Daintree rainforest tour companies in the region;  Under the agreements EXP will acquire 100% of the shares in BC and TJ for a consideration of AUD$56.07m which includes the acquisition of the businesses, land and buildings, vessels, moorings and permits, vehicles, and all other assets and the repayment of loans, so the businesses will be acquired debt free;  The acquisition is a continuation and extension of EXP’s strategy to ultimately become the largest and most respected adventure tourism company in the world;  The acquisition will add $11.1 EBITDA in FY19 and will also be accretive in FY19 the first full year of ownership;  The acquisition will be 100% funded by a fully underwritten A$60.9m equity raising via a 3 for 17 pro-rated accelerated non-renounceable entitlement offer at $0.74 per share, also announced today;  Subject to completion, the BC vendors will be issued 6.7m fully paid ordinary shares in EXP at a deemed issue price of $0.74, as part consideration for the acquisition. The BC vendors have agreed for these shares to be subject to escrow for 12 months from the date of issue;  The BC transaction is expected to complete by 13th December 2017;  The TJ transaction is expected to complete by 18th December 2017;  Certain retention amounts will be held in escrow for various periods supporting warranties.

I’m not sure when Big Cat became “adventure tourism” but never mind. Perhaps my concept of adventure does not align with the mass market. I haven’t looked further through the details and the presentation but this would probably take FNQ based business to 50% or so of group revenue or beyond. The completion times here are also very short.

It does make me wonder whether further acquisitions of similar businesses in Cairns would become a competition issue for EXP?

To be updated after further perusal and analysis.

Note: To reiterate from the previous post this is NOT investment advice on EXP but general comment related to Cairns and FNQ. This is particularly so if you don’t understand the consequence of dilution in a compulsively acquisitive company.

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