Salona Global Medical Device Corp. No. 3 $SGMD.v

The snowball is taking shape.

Salona released their Management Information Circular a couple weeks ago. The Shareholder meeting is March 11. Just my opinion… you should vote Yes on the proposed transaction and hold on to your shares for a bit.

Salona is buying South Dakota Partners (a white label medical device manufacturer) in an all stock deal for about $3.0mm CAD ($2.5mm USD) worth of stock (19mm shares @ $0.16 per share).

South Dakota Partners revenue grew about 25% annually between 2017 and 2019. Covid caused revenues to decline, and my guess is they managed to do about $10mm USD in 2020. I don’t know what SDP normalized earnings are. Seeing a 1/4x (depressed) Revenue multiple on the acquisition does make me happy, though…

The resulting issuer will have about $11mm CAD (8.3mm USD) in working capital and I reckon they do a few more acquisitions this year. Also, I believe Les Cross will eventually be replaced by the COO, Luke Faulstick. Management and Insiders will have about 7mm shares worth of options – a nice incentive to grow the Salona snowball.

There will be some dilution to acquire other small privately-held medical device companies. I’m pretty confident that most acquisitions will be reasonably priced, and the stock will be much higher in a few years than the rollback’ed $0.16 it closed at.

I own shares of $SGMD.v.

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