KRM22 plc, (LON:KRM) the technology and software investment company focused on risk management for capital markets, has today announced that it has come to an agreement to acquire the remaining 40% stake in Irisium Ltd from Cinnober Financial Technology AB, which the Company does not already own for a £0.55m convertible loan note. Nasdaq acquired Cinnober in 2019.
Irisium provides a turnkey market surveillance system that provides customised, market-specific alerts, tailored reports, and integrated case management to make trade surveillance efficient and straightforward. In addition to traditional market abuse scenarios, Irisium monitors high frequency trading, abusive trading patterns and entity relationships. Since the initial investment by the Company, and in addition to enhancing the Irisium market surveillance platform, the Company has successfully integrated it into the Global Risk Platform and is integrating it into the Enterprise Risk Cockpit.
Background to the Transaction
The Company originally acquired a 60% stake in Irisium on 5 June 2018 for a cash consideration of £1.7m. In addition, KRM22 and Cinnober, provided a total debt facility to Irisium of £2.7m proportionate to each Parent Company’s stake in Irisium on that date.
Under the terms of the Transaction, a total of £2.9m in debt (loans advanced to Irisium under the terms of the Debt Facility and accrued interest) together with £0.3 of Irisium other liabilities due to the Parent Companies, has been converted into ordinary shares in Irisium immediately prior to the Company consolidating its ownership of Irisium.
On completion of the debt to equity conversion in Irisium, the Company immediately acquired the remaining 40% stake in Irisium for a total consideration of £0.55m payable to Cinnober by way of a convertible loan note (CLN) provided by KRM22 to Cinnober. The CLN is for a one-year term and can be satisfied by either the allotment and issue of ordinary shares of the Company by no later than 31 July 2020 or settled by cash at any point in the CLN term, at the Company’s sole discretion. The number of ordinary shares to be allotted to Cinnober shall be equal to £0.55m divided by £0.48 or the price at which KRM22 allots shares on any placement concluded before 31 July 2020. The interest rate payable on the CLN is 8 per cent. per annum payable quarterly. Cinnober is currently a 5.71% shareholder of KRM22. No cash consideration is payable upon announcing so is entirely cash neutral to the Company, other than future interest payments.
Benefits of the Transaction
The consolidation of the remaining stake in Irisium will provide the Company with full control over Irisium and allow complete integration with KRM22. The Transaction will immediately remove £0.7m of debt and liabilities from the Group’s consolidated balance sheet and £1.3m of debt from the consolidated balance sheet, should the CLN is satisfied by shares, at the Company’s sole discretion.
Irisium is currently generating £1.6m annualised recurring revenue. For the full financial year to 31 December 2018, it achieved revenue of £1.3m and a loss before tax of £2.2m.
Keith Todd CBE, Executive Chairman and Chief Executive Officer of KRM22 plc commented:
“The transaction is a natural consequence following Nasdaq’s acquisition of Cinnober. It will allow a tighter integration with the core KRM22 Global Risk Platform accelerating the customer benefits from having one platform for market risk and market surveillance.”