* To cut quarterly div to C$0.15 from C$0.30
* To fund deal by $80 mln cash and C$50 mln debt
* Shares at 20-month low (Rewrites; Adds analyst and company comments in third, sixth and eighth paragraphs)
By Aftab Ahmed
BANGALORE, April 12 (Reuters) - Real estate consulting firm Altus Group will buy Argus Software for $130 million, partially through debt that will put more pressure on its already debt-heavy books.
The company also cut its dividend by half to 15 Canadian cents, and its shares fell 16 percent to a 20-month low.
“The company is also transitioning from a lower-growth, high-yield story to one of more aggressive growth, and therefore they want to reduce the pay-out to help fund that growth,” Canaccord Genuity analyst Yuri Lynk said.
Altus will pay $80 million in cash, which it will get by expanding its exsisting credit facility, and by issuing $50 million of debt to some Argus shareholders.
The company, which has a market cap of just over $250 million, saw 2010 earnings before interest, tax, depreciation and amortization (EBITDA) of C$32.7 million ($34.2 million). It has long-term debt of C$131.6 million, according to Thomson Reuters data.
“The debt levels is a concern because of the fact that probably its five times debt to EBITDA. But they have assets that they could divest out... we think they are going to address it either by divesture or an equity issue,” Lynk said.
Altus expects the deal to immediately add to earnings and cashflow that, coupled with divesting non-core assets, could help it bring down its debt levels.
“Our target over the next couple of years is to get it down below 2:1 (debt to EBITDA). We know that we are going to have significant growth with this company (Argus),” Altus Chief Executive Gary Yeoman said in a conference call with analyst.
Argus Software, earlier known as Realm Solutions Inc and co-owned by private equity firm Lightyear Capital LLC and Insight Venture Partners, makes software for analysis and management of commercial real estate investments.
With this deal, Altus will increase its global footprint as the transaction will bring it 4,600 clients in 45 countries.
It is being advised by BMO Capital Markets for the deal, which is expected to close in the second quarter.
Altus Group, formed by merging three real estate consulting companies in 2005, has operations in 14 countries, including Canada, UK, Australia, the United States and the Middle East.
Altus shares fell to $9.01 but clawed back to $9.28, down 14 percent, on Tuesday on the Toronto Stock Exchange. ($1 = 0.956 Canadian Dollars) (Reporting by Aftab Ahmed in Bangalore; Editing by Joyjeet Das)