04-04-2014, 12:30 AM
Simply shooting the S&P 500 to a new record wasn't enough for shareholders of specialty health-counseling and nonemergency transportation provider Providence Service (NASDAQ: PRSC ) who witnessed their stock explode higher by 34.4%. The main catalyst was Providence Service's announcement that it would acquire U.K.-based Ingeus for $58 million in a combination of cash and restricted stock that will vest in four years. Based on certain earnings and performance thresholds, Providence may pay Ingeus up to $124 million in earn-out payments as well over the next five years. Over the past three years, Ingeus' revenue and adjusted EBITDA have grown by 28.6% and 18.7%, respectively. The purchase should allow Providence to take advantage of foreign opportunities and will be immediately accretive to earnings upon closing in the second quarter of this year.
I agree that the rally is a little exuberant, but what they're buying is growth abroad, which looks like a bit of a shift for the company.