One of the more tightly specialized artificial intelligence (AI) stocks on the market had quite a memorable Wednesday. On news that it is bulking up with an acquisition, investors piled into Powerfleet (NASDAQ:AIOT), sending its share price more than 7% higher. That was outstanding when matched against the performance of the S&P 500 index; it slumped by 0.3% across the Hump Day trading session.
Time to bulk up
Powerfleet, whose stock in trade is developing AI of things (AIoT) solutions for the transportation industry, announced the deal shortly before market open. The company has signed a definitive agreement to purchase privately held peer Fleet Complete. The buyer said the total transaction value of the acquisition is $200 million.
Powerfleet said it will finance the deal mainly with a $125 million senior secured loan facility, accompanied by funds from a planned $70 million secondary common stock issue. An additional $15 million should come from a private placement of common shares to an existing shareholder.
In the press release trumpeting the acquisition, Powerfleet CEO Steve Towe said that owning Fleet Complete "is expected to significantly enhance our revenue quality and bolster our EBITDA by increasing our scale and operating presence across North America and Europe."
Towe added that "It will also extend significantly our go-to-market reach through established channel partnerships with some of the world's largest telecommunications providers."
Obvious synergies
This certainly feels like a meaningful acquisition for Powerfleet, and if all goes reasonably well it should be able to integrate the new asset into its own business smoothly. In this era of relatively low-cost financing and frothy equity markets, the combination of the loan facility and the stock issue won't put too much of a burden on the company's fundamentals. It's no wonder investors cheered the news.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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