Codan To The Fore In Critical Communications

Australia | Apr 08 2021

Codan's latest acquisition in the critical communications market should put the company at the forefront of the US government's Next Generation 911 upgrades

-May be able to capture portion of US$15bn in infrastructure funding
-Earnings visibility low yet opportunities are expanded
-Visibility on African gold detector sales a challenge


By Eva Brocklehurst

Communications equipment specialist Codan ((CDA)) will acquire Zetron, a regional/rural provider of US critical communications in the first responder market. Brokers expect the acquisition, for US$45m, will bring about greater scale and allow Codan to take advantage of a broader platform for growth.

Like the recent acquisition of Domo in the tactical communications segment, Zetron is likely to accelerate momentum in critical communications, Canaccord Genuity asserts.

Annual revenue should increase to around $110m from $40m and provide greater scale with access to a larger market. The business complements an existing critical communications offering and provides an end-to-end solution targeting the public sector, primarily in North America.

Zetron is a good strategic fit, in Macquarie's view, adding a strong brand to the LMR (land mobile radio) communications segment. An $8m contribution to operating earnings (EBITDA) is expected in FY22 and this includes conservative cost synergies as Zetron is merged with the LMR division.

The broker finds the command and control (critical communications) sector attractive as revenue is more recurring compared with tactical communications, and could be supported by new US government expenditure.

Zetron's technology includes voice dispatch, emergency call taking, mapping, computer-aided dispatch and fire station alert. The company's products connect command centres to field personnel and the addressable market in emergency response is expected to grow by around 9%.

Moreover, around US$15bn of funding is under consideration as part of the US government's bill relating to Next Generation 911 funding, relating to updating of infrastructure. Moelis points out only Zetron and Motorola offer a full suite of applications.

Brokers also suggest Codan's head of critical communications, Scott French, who previously worked at Zetron, helps de-risk the acquisition and the combined businesses will be able to competently service a growing market.

The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE

If you already had your free trial, why not join as a paying subscriber? CLICK HERE