Boku, Inc. proposed acquisition of Fortumo Holdings and placing to raise up to c.$25 million

Boku

Boku Inc (LON:BOKU), a leading global mobile payment and mobile identity company, has this afternoon announced that it has conditionally agreed to acquire the entire issued and to be issued share capital of Fortumo Holdings, Inc. and its subsidiaries in a transaction valued at a maximum enterprise value of $41 million.

The Acquisition is a significant step in Boku’s global Direct Carrier Billing growth strategy, bringing together the two most profitable platforms in the DCB market with complementary capabilities and customer bases.  The Acquisition will cement the Group’s positioning as a leading mobile payment and mobile identity solutions company.  Fortumo primarily focuses on providing mobile payment solutions to over 400 small-to-medium sized enterprises, but also services larger merchants including Google, Amazon and Tencent.

Fortumo is being acquired for a maximum consideration of $45 million, which includes Boku acquiring $4 million of net working capital.  The Total Maximum Consideration comprises $37.6 million in cash along with approximately $2 million in Restricted Stock Units payable to the selling equity holders of Fortumo plus further consideration of up to approximately $5.4 million in cash, representing 12% of the Total Maximum Consideration, which is to be held in escrow subject to certain EBITDA earn-out, working capital and indemnity conditions being satisfied.

The Acquisition and associated costs will be funded by way of; (i) an unconditional placing to raise gross proceeds of up to approximately $25 million; and (ii) new bank facilities of approximately $20 million.

Acquisition Highlights

•             The Acquisition is a significant step in Boku’s global DCB growth strategy, bringing together the two most profitable platforms in the DCB market with complementary customer bases, geographic spread and technology platforms and consolidating Boku’s position as the global leader in the DCB market.

•          Boku primarily serves large digital merchants and Fortumo primarily serves over 400 small and medium sized merchants with higher margins, with limited customer overlap.

·          For the financial year ended 31 December 2019, restated to Boku’s accounting treatment, Fortumo generated audited revenues of $7.2 million*, Adjusted EBITDA of $2.3m and an operating profit of $2.1 million. As at 31 December 2019, Fortumo had net assets of $8.7 million.

·        Fortumo has grown revenue at a compound annual growth rate (“CAGR“) of 25% between 2017 and 2019; Adjusted EBITDA CAGR was 100% over the same period.

·             Fortumo has traded in line with plans during the period of the coronavirus epidemic with unaudited revenues of $1.8m, a 17% increase from the same period in 2019. Adjusted EBITDA for Q1 was $618,000, 29% up on a year on year basis.

·          The Acquisition is expected to deliver operational efficiencies for Boku through access to Fortumo’s lower operational cost base in Estonia and use of Fortumo’s direct connections in many Asian markets to complement the existing Boku network.

·          The Acquisition is expected to be immediately earnings accretive for Boku (before synergies).

Acquisition Consideration and Placing

·          The Company intends to finance the cash portion of the Total Maximum Consideration and associated expenses through: (i) an unconditional placing of new common shares in the capital of the Company raising gross proceeds of approximately $25 million (£19.8 million), and by drawing down approximately $20 million (£15.9 million) in borrowings pursuant to the terms of the Acquisition Finance Agreement.

·          In addition approximately $2 million of Restricted Stock Units will be issued to the Vendors.

·          As part of the terms of the Acquisition, 12% of the Total Maximum Consideration, equating to approximately $5.4 million (£4.3 million), will be held in escrow, subject to Fortumo’s EBITDA-earn-out, working capital and indemnity conditions.

·          Post-Acquisition leverage is expected to be less than 2x net debt to enlarged Group adjusted EBITDA**.

·          The Placing is being conducted through an accelerated book build process being managed by Peel Hunt LLP.

·          The book build will open with immediate effect following this announcement.

·          The Placing is not being underwritten.

·          Further details of the terms of the Placing are set out in the appendix to this announcement.

·          The Acquisition is conditional, inter alia, upon admission of the Placing Shares to trading on AIM.

·          Admission of the Placing Shares to trading on AIM is expected on or around 22 June 2020. 

·          The Placing is not conditional on the completion of the Acquisition. In the unlikely event the Acquisition does not complete by 17 September 2020 (being the long stop date under the Acquisition Agreement), the Company may, at its option, decide to return the placing proceeds to the Placees, if and to the extent each such Placee remains the holder of its Placing Shares, by repurchase of such Placing Shares out of proceeds legally available to the Company and subject to any necessary shareholder, lender or other approvals.

* Audited Fortumo Revenue was EUR 35.8m which included approximately EUR 29m of carrier receivables counted as revenue. The figures presented are per Boku’s accounting treatment and have been translated to USD at a rate of EUR 1 = 1.12 USD
** Adjusted for Share-based payments, Exceptional Items and Foreign Exchange

Jon Prideaux, Boku Inc’s CEO, commented,

Boku has always grown by a mixture of organic growth and selective acquisition. This deal, which will be our sixth, cements our position as the scale player in Direct Carrier Billing. It brings together the two most profitable players in the industry, with compatible technology, complementary customers and with a great cultural fit.

Martin Koppell, Fortumo’s CEO, commented,

Joining the Boku group of companies is a great next step for the Fortumo team, which has built up a world-class, business critical technology platform used by some of the world’s leading digital merchants. With a joint strategy, we will be able to better help merchants grow their presence across the world. This also represents a fundamental shift in the Direct Carrier Billing market as the reach, complexity, quality and time-to-market for the solutions we build together will be unmatched.

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