Financial technology company Stargroup Limited (ASX:STL) has signed an MoU with Indue Limited to acquire its ATM switching, settlement, processing, telecommunications and reseller business. Indue provides ATM switching, settlement and processing services to approximately 70 ATM deployers, 1700 ATMS and 1350 modems processing 120 million transactions annually and also has an ATM reselling business The acquisition will lift Stargroup’s annualised revenue from $7.5 million to $11.6 million.
HIGHLIGHTS
- Stargroup Limited has signed an exclusive MOU with Indue Limited to purchase various assets relating to a national ATM switching, settlement, processing, telecommunications and ATM reseller business.
- The MOU will enable Stargroup and Indue to undertake due diligence and negotiate to enter into binding asset sale agreements and other contractual documentation in relation to the transaction.
- Upon completion, Stargroup will provide ATM switching services for 70 ATM Deployers, 1,700 ATMs and 1,350 modems, processing approximately 12,000,000 transactions per annum.
- Consideration is $6.5 million payable in cash.
- Acquisition to be fully funded via debt.
- Projected annualised revenue increase of $4.1 million.
- Projected annualised EBITDA increase of $1.7 million.
- Completion expected in December 2016
BACKGROUND
Financial Technology and ATM machine company Stargroup Limited (ASX : STL) is pleased to announce that it will significantly expand and diversify its business as a result of having signed a binding MOU with Indue Limited (Indue) for its Automatic Teller Machine (“ATM”) switching, settlement, processing, telecommunications and reseller business.
Indue provides ATM switching, settlement and processing services (ATM Switch), telecommunications services (ATM Telco) and also resells ATMs (ATM Sales) to approximately 70 ATM Deployers, 1,700 ATMs, 1,350 modems and processes approximately 12,000,000 transactions per annum.
The ATM Switch, ATM Telco and ATM Sales business will increase the current annualised revenue from the ATM division from $7.5 million to $11.6 million with that figure increasing via further organic growth to at least $15 million next financial year.
THE PROPOSED ACQUISITION
Indue has operated its business for over 45 years. Indue provides ATM services to its clients by entering into a legal contract with the clients (Client Contracts).
The proposed acquisition will include Stargroup and Indue executing binding asset sale agreements for all of the rights, title and interests of Indue in the Client Contracts.
CONSIDERATION
Stargroup has agreed to pay $6.5 million with the consideration being paid in cash, on completion.
MATERIAL CONDITIONS
The MOU provides that both parties will negotiate the sale transaction on an exclusive basis until 30 October 2016.
The transaction will not become binding on either party until the following material conditions precedent are satisfied:
- Stargoup completing due diligence in relation to the purchase of the assets forming part of the transaction to the absolute satisfaction of Stargroup;
- Stargroup and Indue executing a binding asset sale agreement on terms agreeable to both parties subject to the entering into an agreement for the provision of ongoing services by the business;
- Stargroup and Indue entering into an agreement which documents the provision of the ongoing services that Indue will provide to Stargroup on completion of the transaction;
- STL obtaining all necessary approvals from the Australian Securities Exchange and its shareholders for the proposed transaction, if needed; and
- Indue obtaining all necessary approvals, including shareholder approval for the Transaction.
Stargroup and Indue anticipate that subject to the Stargroup and business shareholder approvals, the conditions precedent will be readily satisfied.
FUNDING
The acquisition will be fully funded by way of debt.
The Company is well advanced in terms of the negotiations for the funding of the acquisition and it is intended to fund this acquisition by way of a loan agreement(s) with free attaching option(s) on a 1 for $1 basis with an exercise price of $0.12 per option to acquire one Stargroup share, with a 3 year exercise period.
SHAREHOLDER APPROVALS TO BE SOUGHT
Stargroup will provide shareholders with a notice of meeting and explanatory statement detailing the approval resolutions sought for the proposed acquisition, if any. The resolutions proposed, if any, are proposed to be put to members at the upcoming AGM.
The above timetable is indicative only and may be subject to change including in accordance with the requirements of the Corporations Act 2001 and the ASX Listing Rules.
Mr Todd Zani, Stargroup’s CEO and Executive Chairman said “This is another significant transaction for Stargroup and Indue is a market leader in ATM switching, processing and settlement services and has been for some time.
I have had a long term relationship with Indue and they provide industry best settlement and processing services and this is an excellent acquisition of a complementary business for Stargroup.
We believe that we can further add value to the customers of Indue, post the acquisition, and coupled with the ongoing services agreement to be negotiated, Stargroup will continue to provide industry best switching, processing and settlement services and with the combined strengths of both parties, Stargroup will further establish itself in the Australian financial payment technology sector.”
