Shares of WillScot Corp (NASDAQ: WSC) jumped as much as 23.5% in trading Friday after announcing a large acquisition. At 1:05 p.m. EDT shares were bouncing near their high for the day and show no signs of giving up big gains.
Williams Scotsman has agreed to buy MS Holdings, another modular building supplier, for $1.06 billion in cash, 6.5 million shares of stock, and warrants to purchase 10 million more shares at $15.50 per share. The privately owned company had about $453 million in total revenue, $18 million in net income, and $106 million of adjusted EBITDA for the trailing 12 months ended March 31, 2018.
The companies expect to see $60 million in cost synergies after the deal closes, bringing the projected post-synergy price multiple of 6.6 times adjusted EBITDA.
Financing for the acquisition will come from an expansion of debt, including a credit facility that can expand to $1.8 billion. Eventually, the company plans to permanently finance the acquisition with "long-term debt and equity or equity-linked securities."
The market is cheering the idea of WillScot consolidating power in the modular buildings business. That could help it command higher prices, raising margins, and resulting in higher profitability. The fact that management was able to finance most of the acquisition could be a growth driver as well. If they can generate the expected adjusted EBITDA for the business and pay down debt long term, MS Holdings could be a big win for WillScot and its investors.