Stock in Orbital Energy Group (NASDAQ: OEG) rallied over 10% in the early hours of Wednesday trading after the company announced that they will be acquiring Front Line Power, a full-service electrical infrastructure service company, for an aggregate price of $218.4M.
The market has reacted well to the acquisition, as the deal (accretive to earnings and cash flow) is expected to generate a merged revenue of more than $300M in 2022, as well as adding significant scale to OEG with Front Line becoming a wholly-owned subsidiary.
The acquisition will be funded with a $105M, five-year term loan, two-year restricted common shares, and an $85M promissory note held by the sellers. There will be no major change to the senior management team of FLP based on current structural success.
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Orbital Energy has been in a bearish trend since the start of 2021, but recent internal changes such as the appointing of a new CFO might reignite investor faith. Similarly, the company posted positive Q3 results on Monday showing a respectable revenue increase.
OEG stock is showing a daily gain of 11% off the back of the acquisition news, with the stock trading around the $2.60 level with an annual gain of just over 20%. Bulls might want to wait for a little more confirmation before jumping in on this one, downwards momentum still seems to be dominant.