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Learning Technologies Group (LON:LTG) has unveiled almost US$30mln of new acquisitions for its e-learning business.
It is to acquire Rustici Software LLC a software specialist for US$26mln and it has also agreed to invest US$3mln to gain a 30% stake in a company called Watershed Systems which has developed learning analytics systems.
The deals will be paid for in cash and shares and the company says they will be immediately and significantly earnings enhancing in 2016 and beyond.
LTG says the acquisitions increase the group's scale capability and credibility as an international multi-service e-learning business.
'Consistent with our strategy of establishing an international full-spectrum e-learning business acquiring Rustici the global market leader in SCORM conformance firmly places LTG at the heart of the e-learning industry' said Jonathan Satchell LTG chief executive.
LTG chose to separate Watershed a software as a service business run by Rustici's founders from Rusticic. Buying just 30% of Watershed it has limited its exposure to the research and the development side of the business.
"Watershed is still in the cash burn stage that doesn't fit well with the LTG board or LTG shareholders.
'We felt it was more appropriate to make an investment rather than own the business outright at this stage." Satchell added.
Nashville based Rustici was instrumental in the development of the e-learning industry's technical standards and Learning Technologies highlights that the business is deemed to be the global leader in SCORM (Sharable Content Object Reference Model) conformance.
SCORM is the de facto standard for e-learning interoperability which as Learning Technologies explains essentially means it is a system that allows a multitude of other learning content and management systems to communicate.
Rustici over the past four years achieved 41% growth and it was underpinned by 80% recurring revenues. In the twelve months to December 31 2015 the business had earnings of US$2.7mln on US$6.6mln of revenue.
Rustici is Learning Technologies' first US acquisition and the first acquisition funded partly by debt.
In regards to the newly acquired debt Satchell said: "It is a grown up thing for a company to do under the right circumstances' and the decision was made based upon the "proven resilience of the group".
It appears a buy and build strategy is one Learning Technologies looks to take forward but will remain cautious in its acquisitions.
Satchell was keen to state: "Why would we stop now? We are very judicious about the acquisitions we choose. In the last few months we've walked away from quite a few. We really do look for the most talented groups of people."
He went on to add: "Buy and build is a very essential part of where we are taking this business. There will be further acquisition I can pretty much guarantee that."
Numis upgraded its target price to 39p up from 31p and repeated a 'buy' recommendation.
The broker also added that a civil learning contract won in partnership with KPMG is set to provide a material upside after a period of start-up investment in the first half of this year.
Shares jumped more than 13% to 34p.
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