Investment Q&A

The Covelya acquisition is accretive in 2027 and it combines two leading subsea companies. Bigger is better in this industry. Combined revenue goes to $350M+. This should get the attention of larger, and importantly, US sector investors. The target company has had good growth (24% compounded) over the past two years. It adds customers, locations and products. There should be some decent synergies ($10M to start). PNG acquires 12 faciltiies and 750 employees. It is a big bite for the company at $615M. With cash on hand and the equity financing, the balance sheet will remain in good shape. The price ($8.50) of the deal is OK but we would note that the stock ran up fairly hard going into this news (up 10% this week alone). We would expect some volatility as investors digest the share issue and news. PNG also announced a 2026 outlook, which was largely in line with estimates but we think the acquisition will be a bigger driver of the stock in the short term. We would be comfortable buying the deal and the acquisition looks good, though there is some risk: integration needs to go well. Many industry players are private, so we do not have a lot of direct examples of deals. But such acquisitions are highly common for mid-sized companies to bulk up. Also, it is common practice for public companies with high valuations to acquire private entities, using stock (or cash from a stock sale) to make attractive deals with the valuation gap between public and private companies. PNG still needs to execute and make the deal go well, but we think management knows what it is doing here.