REG - Northamber PLC - Acquisition of Tempura Companies

NorthamberAnnouncement

30/04/2024 07:00

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RNS Number : 4838M  Northamber PLC  30 April 2024

30 April 2024

 

Northamber PLC

("Northamber" or the "Company")

Acquisition of Tempura Companies

Northamber (AIM:NAR), a leading value-add AV & IT distributor, is pleased
to announce that it has acquired, from Matthew Light (the "Seller"), Tempura
Technology Limited ("TTL") and Tempura Communications Limited ("TCL") together
with their respective subsidiaries (collectively "Tempura") pursuant to a
share purchase agreement (the "SPA") that was exchanged and completed
yesterday (the "Acquisition").

Tempura is a value-add distributor of unified communications including VoIP,
connectivity, audio visual and video conferencing solutions in the UK, Ireland
and the BeNeLux.

The total consideration for the Acquisition is up to £6.02 million in cash
and, subject to the passing of the Resolutions and Admission (each as defined
below), the issue and allotment to the Seller of 181,818 ordinary shares of 1
pence each in the capital of the Company ("Ordinary Shares").

Acquisition highlights

·   Acquisition of Tempura, an established profitable, cash generative
distributor of unified communications

·   Track record of organic revenue growth, profitability and international
operations

·   Shared values of customer centricity, entrepreneurialism and technical
value add

·   Broad range of professional services ensure strong vendor partnership
and customer longevity

·   The board of directors of Northamber (the "Board") believe that the
Tempura business is scalable with potential for strong organic growth

·   Tempura has a diverse client base across varying business and sectors

·   Subsidiaries in Ireland and the Netherlands broadens Northamber's reach
beyond the current UK focus; this will be particularly valuable in a post
Brexit environment to allow Northamber to better support customers with
project roll outs

·   In line with Northamber's strategy of building a leading industry
position in technical value add distribution of Audio-Visual and Unified
Communications, through organic growth and via strategic acquisitions

·   The enlarged group will have a strong services focus as a technical
distributor with strong gross margins

The Directors believe the Acquisition will:

·   diversify the service offering of the Company through expansion into
complementary markets;

·   provide cross selling opportunities;

·   provide a highly scalable business model with the opportunity to
increase brand awareness; and

·   enhance earnings per share in the first full year of ownership (FY25),
before consideration of potential synergies.

Acquisition terms

Total consideration of up to £6.02 million, comprises:

·   £3.28 million in cash ("Initial Cash Consideration") paid on
completion of the Acquisition ("Completion").

·   Subject to the passing of the Resolutions and Admission (each as
defined below), £0.1 million through the issue of 181,818 Ordinary Shares
(the "Consideration Shares") at an issue price of 55 pence per Consideration
Share.  The Consideration Shares will be subject to a 36 month lock in period
during which the Consideration Shares cannot be sold or transferred other than
in respect of typical carve outs.

·   Performance based contingent consideration of up to a maximum of £2.64
million ("Contingent Consideration"), based on the EBITDA for three financial
periods ending 30 June 2025, 2026 and 2027.  If it becomes due, the
Contingent Consideration will be paid in three instalments with the final
payment due to be made following completion of the audit of the enlarged
group's accounts for the financial year ended 30 June 2027.

The Company has secured new financing facilities from its bankers Barclaysand
the Initial Cash Consideration will be funded from Northamber's existing
available cash and the new facilities.  The Company anticipates that the
Contingent Consideration will be paid in the same way.

The SPA contains certain customary warranties and tax indemnities given by the
Seller in relation to Tempura and its business, subject to agreed limitations.
 

Following the Acquisition, the Tempura businesses will become wholly owned
subsidiaries of the Company.

Matthew Light has agreed to continue with the business to assist initially
with the integration of Tempura into the Northamber group and thereafter to
drive growth in the Company's combined Unified Communications offering.

About Tempura

Tempura Communications was founded in 2002, with an initial focus specialising
in IP infrastructure and telecom links, enabling solutions and providing
access to products and services from leading Tier 1 ISPs to the reseller
channel in the UK and Ireland. During 2008, Tempura launched its video
conferencing offering, which has been underpinned and upgraded the portfolio
by adding commercial display and professional audio solutions, in anticipation
of the growth of videoconferencing usage in the UK. This led to a Unified
Communications division with a range of professional Displays, Interactive
Screens for Education and Corporate or specifically for Microsoft Teams and
Zoom Rooms, Pro Audio solutions, Desktop and Room Cameras and
Videoconferencing systems and accessories in support.

Over the years, Tempura has effectively enabled internet connectivity, Voice
services and video conferencing solutions for varying businesses; from small
businesses, to hotel chains, government departments and large well-known
companies, through a network of partners from locally focused consultancy
partners through to the largest Value added Resellers in the country and/or
Internationally.

Located in Basingstoke, Tempura also has premises in Dublin and the
Netherlands to provide simpler and faster access to Europe for its UK reseller
base.

Tempura continues to lead in the distribution of Unified Communications
including VoIP, connectivity, Audio Visual and video conferencing solutions
supplying to over 1,500 resellers from a base of over 6500 partners in the UK,
Ireland and the Netherlands.

Tempura supports 3 distinct areas: Networking/Connectivity, Voice/Telephony
and Unified Communications, incorporating Audio Visual and Video; the range of
professional services offered are based on best of breed products to create
leading solutions our partner base can present to their customers with
confidence.

Tempura Communications Ltd, operating within the UK for over 20 years,
provides traditional distribution routes to market with value added reseller
partners across the country and is the parent company of Tempura
Communications Ireland Ltd, and Tempura Communications B.V. based in Dublin
Ireland, and Oosterhout in Netherlands respectively. Tempura Ireland is now
over 10 years old is focussed on the same portfolio specifically for Repuplic
of Ireland market, with Tempura BV providing simplified deployment to UK
resellers working with UK customers with overseas requirements in Europe as
well as providing the same products and service categories as with the UK and
Ireland to the Benelux based reseller community.

Tempura Technology Ltd, the parent company for Tempura Connect Ltd, was
incorporated with its sole purpose in providing resellers with alternative
billing options such as white labelled or contracted invoicing, DirectDebit
payment processing and financial services such as asset leasing for their
customers.

Based on unaudited management accounts, for the year ended 30 June 2023,
Tempura had revenues of £14.61 million, EBITDA of £0.96 million and profits
before tax of £0.81 million; net assets were £3.02 million. Similarly, for
the 6 months ended 31 December, Tempura had revenues of £6.11 million, EBITDA
of £0.91 million and profits before tax of £0.81 million; net assets were
£3.78 million.

Strategic Rationale for the Acquisition

The Acquisition, which is in line with Northamber's strategy of building a
leading industry position in Audio-Visual and Unified Communications through
organic growth and via strategic acquisitions, is expected to be earnings
enhancing in its first full year of ownership (FY June 2025), before
consideration of potential synergies.

The Board believes that the terms of the Acquisition, and the valuation of
Tempura, are attractive given the opportunities to diversify the Group's
service offering through expansion into complementary markets, and to leverage
existing resources to accelerate growth. The Board considers the Tempura
business model to be highly scalable, and the Directors have identified the
opportunity to increase brand awareness and accelerate organic growth through
the application of additional sales and marketing resource available within
the Group.

The acquisition of a well-established business with a strong team has the
advantage of an existing client base, whilst expanding the Group's service
offering and providing opportunities for sustained growth through marketing
efforts, additional nationwide partners and cross-selling.

Matthew Light will retain his role with Tempura after Completion on a full
time basis, to ensure optimum integration and will play a key role across
Northamber.

General Meeting, Admission of Consideration Shares and Total Voting Rights

The issue of the Consideration Shares is conditional upon the approval by the
Company's shareholders of the resolutions (the "Resolutions") to be proposed
at a general meeting of the Company convened for 24 May 2024 (the "General
Meeting")  A circular containing a notice of the General Meeting will be
posted later this week.

Application will be made to the London Stock Exchange for the admission of the
Consideration Shares to trading on AIM in accordance with the AIM Rules for
Comapneis ("Admission"). It is expected that Admission in respect of the
Consideration Shares will become effective on or around 8.00 a.m. on 28 May
2024.

The Consideration Shares will rank pari passu with the existing Ordinary
Shares. Following Admission of the Consideration Shares, the Company will have
27,413,404 Ordinary Shares in issue and no Ordinary Shares in treasury.
Therefore, the total voting rights in the Company will be 27,413,404 Ordinary
Shares.

This figure may be used by shareholders as the denominator for the calculation
by which they may determine if they are required to notify their interest in,
or any change to their interest in, the Company under the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority.

Alex Phillips, Executive Chariman of Northamber, commented:

"We are delighted to welcome Matthew and the Tempura team into the Northamber
group. Over the last 20 years they have established a very strong reputation
for consistently delivering high-quality services and solutions greatly valued
by customers.

We are excited by the opportunities that lay ahead as we continue to invest in
profitable growth and offer our unique brand of services across the broadening
customer base of the business, including particularly in international
markets.

The Board believes that there is significant opportunity for further suitable
acquisitions in the sector, which should generate additional value for
Northamber's shareholders in the medium term."

Matthew Light, Managing Director of Tempura, stated:

"We see a great many synergies with Northamber, including its culture,
products and services and I am pleased to be joining the senior management
team of a founder friendly business and to become a shareholder in Northamber.

By becoming part of the Northamber group, we will be able to reinforce and
broaden our offering to existing and new customers, driving growth of both
Tempura and the current Northamber business, together with continued gross
margin improvement, aided through shared best practices and general economies
of scale linked by a common ethos and goal focused around service."

Contacts:

 Northamber PLC                                              investor_relations@northamber.com

 Alex Phillips, Executive Chairman
 Singer Capital Markets (Nominated Adviser and Sole Broker)  Tel: +44 (0) 207 496 3000
 Philip Davies / Finn Gordon

 

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