- 01Service Stream agrees to buy Programmed for $975m
- 02$475m equity raise plus debt and cash funds deal
- 03Targets $30m savings; close due March 2027, subject to approvals
Service Stream (ASX: SSM) has agreed to acquire infrastructure and facilities services provider Programmed for $975 million, substantially expanding its operations across Australia and New Zealand.
The binding transaction with Persol Asia Pacific will add facility management, property services, industrial maintenance, and staffing operations to Service Stream’s existing infrastructure services business.
To finance the purchase and related costs, Service Stream has launched a fully underwritten $475m equity raising alongside expanded debt facilities and a contribution from existing cash.
Completion is targeted for around 1 March 2027, subject to competition approval and other conditions, including the retention of specified material customer contracts.
Following completion, Service Stream plans to review Programmed’s contract portfolio and operating structure, with integration performance and the achievement of forecast savings remaining subject to execution risks.
Substantial Operating Scale
Established in 1951, Programmed serves about 5,000 active customers from approximately 200 locations, employing roughly 6,600 people and drawing on a pool of 8,000 specialist contractors.
Its customers span government, social housing, transport, utilities, education, health, resources, and industrial markets, giving Service Stream exposure to a broader range of essential assets.
Programmed generated approximately $3.68 billion in revenue and EBITDA of $148m in the 12 months to June 2026.
The Facility Management division held about $3.8bn of work-in-hand as at May, with a further $2.7bn in potential contract extension options rather than committed work.
On a combined pro forma basis, the two businesses had annual revenue of approximately $6.16bn, EBITDA of $312m before synergies, and total work-in-hand of $12bn.
Integrated Earnings Improvement
Service Stream expects initial annual cost savings of $30m, with half targeted within 18 months after completion and the full amount within 36 months.
The savings are expected to come principally from resourcing and procurement, alongside property, technology and other overhead efficiencies, at an estimated one-off integration cost of $35m.
Including these anticipated savings, management forecasts more than 20% accretion in adjusted earnings per share on a pro forma 2027 financial-year basis, compared with mid-single-digit accretion before synergies.
“The acquisition of Programmed marks a significant and exciting milestone in Service Stream’s journey, bringing together two businesses with highly complementary capabilities and supporting significant and sustainable value creation in support of our clients and shareholders,” managing director Leigh Mackender said.
“In line with our stated strategy, the combination enhances Service Stream’s ability to deliver integrated end-to-end capabilities, significantly expands Service Stream’s total addressable markets across a long-held client base operating across growing end-markets, and supports earnings resilience.”
Equity Raising and Debt Funding
The equity component comprises a $219m institutional placement and a $256m accelerated, non-renounceable entitlement offer on a one-for-4.9 basis.
Both are priced at $2.03 a share, a 7.7% discount to the $2.20 closing price on 6 November, with approximately 234 million new shares proposed for issue.
Eligible retail shareholders in Australia and New Zealand are scheduled to receive their entitlement offer from 16 November, with applications closing on 27 November under the indicative timetable.
Service Stream plans to draw $490m of debt and contribute $50m in existing cash, having increased its total debt facilities from $395m to $895m to support the acquisition and combined operations.
The purchase price remains subject to working-capital and debt adjustments, while an additional reduction of up to $25m is possible if Programmed misses a specified earnings hurdle.
Implied Enterprise Value
The transaction implies an enterprise value of approximately $1.09bn including lease liabilities and an acquisition multiple of 7.4 times Programmed’s recent annual EBITDA before estimated synergies.
Service Stream forecasts net debt at 2.2 times pro forma EBITDA on completion, falling towards 1.5 times within two years if its deleveraging plans progress as expected.
The group intends to hold its dividend per share broadly in line with the 2026 financial year for up to two years, depending on performance and capital requirements.
Separately, Service Stream reaffirmed its expectation of stronger standalone revenue and earnings growth in the 2027 financial year, citing a solid first quarter and anticipated margin improvements in utilities and defence.
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