PROACTIS Holdings Plc (LON:PHD), the specialist spend management solution provider, today announced that it has conditionally agreed to acquire all of the outstanding membership interest in Perfect Commerce, LLC (“Perfect Commerce”), a global provider of spend management solutions with operations in the US, UK and Europe (the “Acquisition”), for an aggregate consideration of up to $132.5 million (approximately £102.4 million), together with an oversubscribed conditional placing to raise £70.0 million at 165 pence per Placing Share, through finnCap, acting as sole bookrunner to the Company for the Placing.
The Acquisition is consistent with PROACTIS’ growth strategy, which is designed to deliver a business that is capable of addressing a growing global market demand for spend management solutions. Perfect Commerce develops and sells cloud-based, technology-led, spend management solutions for the public and private sector markets. It has complementary territorial reach with extensive international capabilities serving approximately 150 customers (largely Tier 1), with over 1.3 million users across more than 80 countries, 20 languages and 100 currencies. Further, Perfect Commerce operates its own proprietary supplier network that it calls ‘The Business Network’ and which has approximately 970,000 suppliers connected to it. Those suppliers are able to use The Business Network to collaborate with and transact efficiently and electronically with their customers.
The Acquisition constitutes a reverse takeover under Rule 14 of the AIM Rules, and accordingly will require Shareholder approval at the General Meeting of the Company, to be held on 31 July 2017.
Key transaction highlights include:
· Transformational acquisition, significantly accelerating PROACTIS’ strategy
· Strong strategic, commercial and financial rationale, increasing PROACTIS’ scale, geographic footprint, customer opportunity, operational efficiencies and solution set
· Increased supplier commerce opportunity through The Business Network
· Multiple commercial and operational synergies:
o expected net annualised cost savings of approximately £5.0 million
o significant cross-sell / up-sell opportunities
· Expected to be earnings enhancing in first full financial year of ownership
· Placing of new Shares to raise £70.0 million, with significant over-subscription and tight discount
· New HSBC debt facilities totalling £45.0 million, consisting of a £30.0 million RCF facility and a £15.0 million term loan
· Issue of $5.0 million of Convertible Acquisition Loan Notes to the Proposed Director and another senior Perfect Commerce employee
· Appointment of new Chief Executive Officer, Hampton Wall (President and Chief Executive Officer of Perfect Commerce), with effect from Completion, with Tim Sykes resuming CFO role
Details of the Placing
PROACTIS has conditionally raised £70.0 million (before commissions, fees and transaction costs) by way of a conditional placing on a non pre-emptive basis of 42,424,243 Placing Shares at the Placing Price of 165 pence per Placing Share. The Placing Price represents a 5.7 per cent. discount to the closing middle market quotation price of a Share on 6 July 2017 of 175.0 pence per Share, being the last practicable date prior to this announcement. The Placing Shares represent approximately 45.8 per cent. of the Enlarged Share Capital.
Details of the Acquisition
The Company proposes to finance the Acquisition through the Company’s existing cash reserves, the net proceeds of the Placing, the Convertible Acquisition Loan Notes and the New Debt Facilities. At Completion, the Company expects to pay a total consideration of approximately $127.5 million, payable in cash and by the issue of the Convertible Acquisition Loan Notes. In addition, the Company will pay up to a further $5.0 million in additional cash consideration upon the occurrence of specified events during the period to 31 July 2018.
The Placing and Acquisition are conditional, inter alia, on approval by the Shareholders at the General Meeting to be held at 11.00 a.m. on 31 July 2017 at the office of finnCap Ltd at 60 New Broad Street, London, EC2M 1JJ, and Admission taking place by no later than 15 August 2017. Admission is expected to occur at 8.00 a.m. on 1 August 2017, and the Acquisition is expected to complete on or about 4 August 2017. Re-admission is expected to occur by 8.00 a.m. on 7 August 2017 and no later than 15 August 2017.
An Admission Document, including details of the General Meeting and the Resolutions, is expected to be posted to Shareholders today. In addition, a copy of the Admission Document will be available from the Company’s registered offices from the date of the Admission Document until the date falling one month from Admission, and on the Company’s website at www.proactis.com.
The Admission Document will contain detailed information about the Transaction and explain why the Directors consider the Transaction to be in the best interests of the Company and the Shareholders as a whole, and accordingly unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, notice of which will be set out at the end of the Admission Document. The Directors who hold interests in Shares have irrevocably undertaken to vote in favour of the Resolutions to be proposed at the General Meeting in respect of a total of 10,606,986 Shares representing approximately 21.1 per cent. of the Shares.
Board changes
The Board is pleased to announce the appointment of George Hampton Wall Jr, currently President and Chief Executive Officer of Perfect Commerce, as Chief Executive Officer of the Company, with effect from Completion. Mr Wall will replace Rod Jones as Chief Executive Officer, who retired from the Board yesterday with immediate effect. Tim Sykes, the current Chief Executive Officer Designate and Chief Financial Officer will, with effect from Completion, resume his role at Chief Financial Officer.
Further information regarding Mr Wall’s appointment is set out in paragraph 16 below.
Tim Sykes, Chief Financial Officer of PROACTIS Holdings Plc, commented: “This is a highly complementary and transformational acquisition which we expect to be earnings enhancing in the financial year ending 31 July 2018. The Acquisition will accelerate PROACTIS’ growth and bring substantial global scale to the Group, positioning us to exploit the high growth areas of the spend management market and enabling us to provide our customers with an even broader product offering.
“In addition, it will build our scale in the US, UK and mainland Europe, with the Enlarged Group having a uniquely balanced and scaled commercial and operational capability across all of those territories. The combined solution set will enable us to target both larger and more complex customer contract opportunities, wherever that customer might be located.
“As well as complementing the core business, we expect PROACTIS’ own early-adopter product offering in supplier commerce to be transformed by the addition of The Business Network.
“The Board has identified significant efficiencies that it expects to realise through the combination of commercial and operational processes and expects these to be delivered within the first twelve months following Completion. We also believe that we are acquiring Perfect Commerce at a profitability inflexion point, with its momentum underpinned by a series of new name wins in recent months.
“We are delighted that Hamp is joining the Board at this exciting time. Hamp brings with him considerable experience in the industry, as well as a specific skillset in acquisition integration, and he will be of great value to the Company as we continue to grow. On behalf of everyone at PROACTIS, I would like to thank Rod Jones for his contribution to the growth and success of PROACTIS to this point and wish him a happy retirement.
“The support shown by investors for this Placing and Acquisition has been outstanding and has resulted in the Placing being significantly oversubscribed, by both existing and certain new investors, who we welcome on to the Company’s share register. This is again a clear vote of confidence in the Board’s growth strategy and we look forward to continuing to deliver on this.”
Hamp Wall, President and Chief Executive Officer of Perfect Commerce, commented: “We are excited to be joining PROACTIS at a time of such rapid innovation in the industry. We have a highly complementary product set, customer base and geographic reach and we look forward to offering our customers an enhanced product offering.
“I was extremely encouraged by the appetite of investors and HSBC for this transaction and I look forward to delivering value for them in return.”
