Shares in shipbroking and logistics group Clarkson (CKN) sailed to a new high on the announcement the firm had bought Link Group. Link is the market-leading North American physical crude and derivatives oil brokerage business and data provider.
Earnings enhancing
The acquisition marks a major step in Clarkson’s strategy to enhance and grow its capabilities in physical commodities, derivatives and data. It also expands Clarkson’s presence in the Americas and will be immediately earnings enhancing.
With WTI (West Texas Intermediate) now part of the Brent pricing complex, market participants are increasingly using the CME HTT (WTI Gulf Coast) contract to hedge WTI price and cargo exposure.
Link is the leading broker in the physical WTI market across West Texas and the U.S. Gulf Coast. There is growing adoption of these products, with trading activity extending into European markets where Clarkson’s clients are based.
The business was acquired for a total cash consideration of $80 million funded from existing cash resources. Clarkson shares rose 35p or 0.75% to a new all-time high of £47 on today’s news.
We only reported on Clarkson’s FY results a week or so ago and noted the rise in the shares year-to-date. This acquisition sits nicely with the existing businesses and will be EPS enhancing within the first year.
Alas, the shares are no longer cheap versus their long-term history so further progress relies on upgrades. We will wait and see what analysts do with their numbers but we wouldn’t be inclined to chase the stock.
Read the press release here: https://www.clarksons.com/home/investors/
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