Vysarn to Acquire NewGround in Earnings-Accretive Water Infrastructure Expansion

Vysarn (ASX: VYS) has entered a binding share sale agreement to acquire NewGround for up to 33 million Vysarn shares and $25 million in cash as it expands into water infrastructure, irrigation, and facilities management.

The acquisition will add a new operating segment across government, urban development, and recreational infrastructure markets.

Vysarn expects the transaction to be approximately 25% earnings per share accretive on a pro forma basis, using its FY2026 net profit before tax forecast and NewGround’s assumed maintainable net profit before tax.

The purchase price assumes NewGround will be acquired debt free and with an agreed working capital amount of $6m at completion.

Upfront and Deferred Consideration

The acquisition includes an upfront payment of $8.33m in cash and 28.6 million Vysarn shares, equivalent to total upfront consideration of $30m.

Of the upfront shares, 25.3 million will be escrowed for 12 months and 3.3 million for 24 months.

Deferred consideration will depend on NewGround’s future EBIT performance over the three years after completion.

Year 1 consideration comprises $3.33m in cash and 4.4 million Vysarn shares, escrowed for 12 months, subject to NewGround achieving EBIT of $7.5m.

Year 2 consideration comprises $6.66m in cash if NewGround achieves EBIT of $8m, while Year 3 consideration comprises $6.68m in cash if EBIT reaches $8.5m.

Purchase Valuation Metrics

Vysarn assessed NewGround’s maintainable EBIT at $7m, with the acquisition implying a 4.3x enterprise value to EBIT multiple based solely on the upfront consideration.

That multiple rises to 4.9 times if NewGround achieves the Year 1 EBIT hurdle, 5.4 times if it achieves the Year 1, and Year 2 hurdles and 5.9 times if all three hurdles are achieved.

Vysarn proposes to fund the cash component of the acquisition through a combination of existing cash reserves and new acquisition debt facilities.

Completion remains conditional on due diligence, funding sufficient to pay the upfront consideration, and required consents or waivers under material contracts.

New Water Infrastructure Platform

NewGround designs, constructs, installs, and maintains industrial-scale irrigation systems, pumping systems, and ancillary technology.

The business serves local government, urban developers, large-scale landscapers, parks, and alternative sporting precincts.

It also has an integrated supply chain for irrigation, plumbing and water management products, supporting its vertical service model and providing wholesale and distribution revenue from third-party retailers and end customers.

NewGround was established in 2018 by an executive with more than 40 years of irrigation industry experience and has more than 100 staff, facilities in Western Australia, and long-standing blue-chip clients across government, urban developer, and sports sectors.

Strategic Diversification

Vysarn expects NewGround to provide a material increase in scale and earnings growth while adding a service offering and revenue model it views as defensive.

The acquisition also provides immediate national growth opportunities in facilities management.

Vysarn and NewGround have identified medium-term opportunities to capture more of the water service value chain in the resources sector by using NewGround’s products and capabilities across areas not currently established in Vysarn’s other operating segments.

Vysarn said the deal aligned with its strategy to build a multi-sector and multi-geographical integrated water services business.

The board and management also expect NewGround to provide a degree of defensive earnings that are countercyclical to the company’s current exposure to the resources and utilities sectors.