REG - Trakm8 Holdings PLC - Acquisition and Placing <Origin Href="QuoteRef">TKM8.L</Origin>

Trakm8 HoldingsAnnouncement

21/12/2015 07:11

RNS Number : 6820J
Trakm8 Holdings PLC
21 December 2015
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES LAWS OR REGULATIONS.
21 December 2015
TRAKM8 HOLDINGS PLC
("Trakm8", the "Group" or the "Company")
Proposed acquisition of Route Monkey Holdings Limited and 6 million placing
Adds fleet routing optimisation capability
Trakm8 Holdings Plc, the AIM listed telematics and data provider to the global market place, is pleased to announce that it has conditionally agreed to acquire the entire issued share capital of Route Monkey Holdings Limited ("Route Monkey"), a provider of technology solutions that optimise fleet routing, for a consideration of up to 9.1million,including maximum deferred consideration of 2.0 million (the "Acquisition"). 
The Acquisition will be funded through a combination of a drawdown of new Trakm8 debt facilities, a placing of 1,801,802 new ordinary shares of one pence each in the Company ("Ordinary Shares") ("Placing Shares") at a price of 333 pence per Placing Share (the "Issue Price") to raise 6 million (the "Placing") and 184,441 new Ordinary Shares being issued as part of the consideration to the senior management shareholders of Route Monkey ("Consideration Shares"). 
The Placing with new and existing institutional investors, conducted by finnCap, was oversubscribed. The Placing adds new blue-chip institutions to the share register. The Acquisition is expected to complete ("Completion") on admission of the Placing Shares to trading on AIM ("Admission").
The Acquisition is in line with Trakm8's strategy of augmenting its organic growth with selective acquisitions that expand its telematics offering to both insurance and fleet customers. The Acquisition is expected to be immediately earnings enhancing.
Transaction Highlights
 Trakm8 to acquire Route Monkey for a consideration of up to 9.1million,including a maximum of 2 million deferred cash consideration;
 Initial consideration of 5.4 million is payable on Completion, in addition to a repayment of a company loan valued at 1.7 million1;
 The initial consideration will be funded as follows:


0.5m
Debt draw down on new banking facilities
6.0m
The Placing
0.6m
Consideration Shares
7.1m
Total
 
Strategic Highlights
The Acquisition brings the following strategic benefits for Trakm8:
 Route Monkey adds new and complementary technology capability to Trakm8 in the field of fleet route planning including a strong capability for electric vehicles;
 Trakm8 will integrate Route Monkey's algorithms and related software into Trakm8's telematics and camera solutions to provide an enhanced service offering;
 Trakm8's existing Logistics solution is highly effective in the organisation of orders, jobs and deliveries but will benefit from a dynamic optimisation enhancement which Route Monkey provides, and;
 Trakm8 provides Route Monkey with access to its larger customer base and sales force.
John Watkins, Executive Chairman of Trakm8 commented:
"The acquisition of Route Monkey is highly complementary to Trakm8 as it adds route planning and optimisation capability to our existing technology, a key to enabling us to offer integrated solutions to customers in line with the development of market requirements.
"We look forward to welcoming the Route Monkey team into the growing Trakm8 group and expect the business will add another source of organic sales growth and recurring revenues. 
"Together the acquisitions of Route Monkey and DCS (completed in June 2015) significantly enhance Trakm8's competitive advantage, add substantial growth opportunities, and are expected to be earnings enhancing." 
For further information please contact:
Trakm8 Holdings plc
+44 1747 858444
John Watkins, Executive Chairman
James Hedges, Finance Director

MHP Communications (Financial PR to Trakm8)
+44 20 3128 8100
Reg Hoare / Jade Neal / Charlotte Coulson

finnCap (Nomad & Broker to Trakm8)
+44 20 7220 0500
Ed Frisby / Simon Hicks - corporate finance
Joanna Scott - corporate broking

Background on Route Monkey and Integration Plans 
Route Monkey is a software provider which specialises in solutions that optimise fleet route planning, for both conventional and electric vehicles. Its software generates savings and efficiencies for organisations by optimising their fleet, resources and infrastructure. Its main products include mathematical algorithms, software and consultancy. Customers include Shell, BMW, Yodel and Iceland.
The business was founded in 2009, and will continue to be based in Livingston, Scotland whilst retaining its small offices in Gateshead and Amsterdam; it currently has 23 employees (including six engineers and five sales people). Senior management are being retained and incentivised. 
Trakm8's strategy is to integrate Route Monkey's algorithms and related software into Trakm8's telematics solutions. Trakm8 will also consolidate Route Monkey's legal, accounting and HR functions into its own. Route Monkey's sales force will be boosted by the existing Trakm8 sales force and customer opportunities. Trakm8 will continue to develop the Route Monkey brand and will undertake an integration plan for both the product and engineering to combine the best of both companies. 
In the year ended 31 December 2014, Route Monkey recorded revenues (including a proportion of recurring revenues) of 1.7 million and profit before tax of 0.7 million. Net debt was 0.5 million at the year end, with net assets of 1.2 million. 
Reasons For and Benefits of the Acquisition
The board of Directors of Trakm8 considers the opportunities represented by the Acquisition to be:
 Route Monkey's core technologies complement Trakm8's existing Fleet Management solutions. Combining Route Monkey's optimisation with Trakm8's telematics and camera solutions will provide an enhanced service offering;
 Route Monkey provides demonstrable expertise in the increasingly important electric vehicle market;
 Route Monkey software provides a dynamic optimisation enhancement to Trakm8's existing Logistics solution which is highly effective in the organisation of orders, jobs and deliveries;
 Trakm8 provides Route Monkey with access to its larger customer base and sales force;
 Significantly enhances Trakm8's competitive advantage, and; 
 Together with the acquisition of DCS (completed in June 2015) adds growth opportunities for the combined Group. 
The Directors expect the Acquisition to be immediately earnings enhancing for the Group. This statement does not constitute a profit forecast nor should it be interpreted to mean that the future earnings per Ordinary Share of the Group following Completion will necessarily match or exceed historical earnings per Ordinary Share.
Terms of the Acquisition and New Banking Facilities 
Trakm8 is acquiring Route Monkey from its senior management and The North East Technology Fund L.P. and Northern I.T. Research Ltd for a totalmaximum consideration of up to 9.1 million (on a debt free cash free basis). The consideration is payable as follows:
 Initial consideration of 5.4 million (4.8 million cash and 0.6 million in Consideration Shares) payable on Completion, subject to any adjustments against a targeted level of working capital in Route Monkey on Completion1; 
 Repayment of 1.7 million company loan payable in cash on Completion1; and
 Up to 2.0 million of deferred conditional cash consideration payable on 1 April 2017 (based on performance in the year to 31 December 2016).
In addition, following Completion new options over a total of 300,000 Ordinary Shares will be allocated amongst key Route Monkey staff with an exercise price equal to the Issue Price.
To part fund the Acquisition and provide additional future headroom, Trakm8 has increased its total banking facilities on Completion to 10 million, comprised of:
 5 million term loan facility (1.95% + HSBC base rate); and
 5 million RCF facility (1.5% + LIBOR on drawn, 0.75% on undrawn).
The RCF facility will be undrawn following Completion. The Acquisition remains subject to completion of the Placing and is expected to complete on Admission.
1Initial cash consideration and repayment of a company loan to equal 6.5 million. The loan is currently estimated at 1.7 million and the final quantum of the loan will be confirmed on Completion.
Details of the Placing and Total Voting Rights
Pursuant to the Placing, the Company will issue 1,801,802 new Ordinary Shares (the "Placing Shares") at the Issue Price. Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM and Admission is expected to occur on 30 December 2015. The Placing Shares will rank pari passu in all respects with the existing Ordinary Shares.
The Placing is conditional, inter alia, upon the placing agreement not having been terminated, and admission of the Placing shares having occurred by no later than 30 December 2015 (or such time and date as the Company and finnCap may agree, being not later than 29 January 2016). The Placing is not being underwritten.
Pursuant to the Acquisition Agreement, the Company will issue 184,441 Consideration Shares at the Issue Price. Application will be made to the London Stock Exchange for the Consideration Shares to be admitted to trading on AIM and Admission is expected to occur on 30 December 2015. The Consideration Shares will rank pari passu in all respects with the existing Ordinary Shares.
Following Admission, the Company's enlarged issued share capital will comprise 32,035,064 Ordinary Shares. The Company holds 29,000 Ordinary Shares in treasury, therefore the total number of voting rights in the Company will be 32,006,064. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.
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NOTES TO EDITORS
About Trakm8
Trakm8, the M2M telematics company using Big Data analytics to improve driver behaviour is a leading technology designer, developer and manufacturer of telematics products and solutions.
The Group, based in Shaftesbury, Dorset, distributes its hardware and software through a network of distributors worldwide. In addition the Group provides vehicle monitoring and tracking services direct to the B2B market.Trakm8's IP owned products and services allow vehicles and drivers to be monitored, allowing organisations to manage deliveries and services, or track stolen vehicles down to five metres.
In June 2015, the Group acquired the business and assets of DCS Ltd, who specialise in the design and distribution of camera systems for the motor vehicle, bicycle and security markets. This further strengthens Trakm8's offering into the Telematics marketplace, with the acquisition based on the market's demand for forward facing vehicle cameras to record driving incidents and mitigate the risk from "crash to cash" accidents.
Trakm8's most recent generation of hardware is the T10 product range, which includes self-install telematics devices. The Group's services also include a driver behaviour management solution that reduces fuel consumption by 10% or more and reduces the risk of accidents. This is complemented by a logistics routing and scheduling package, integrated tachograph data reporting facilities, and the ability to read vehicle DTCs (Diagnostic Trouble Codes) reducing serviceability downtime.The Group's customers include the AA, St Gobain, EON, Direct Line Group, & Young Marmalade.
Trakm8 has been listed on the AIM market of the London Stock Exchange since 2005.
www.trakm8.com/ @Trakm8
IMPORTANT NOTICES
No statement in this announcement is intended to be a profit forecast or estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by law or by the AIM Rules for Companies, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.
finnCap Ltd ("finnCap") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for the Company and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any matters referred to in this announcement.
Apart from the responsibilities and liabilities, if any, which may be imposed on finnCap by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, finnCap does not accept any responsibility whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Placing Shares or the Placing, and nothing in this announcement is or shall be relied upon as, a promise or representation in this respect whether as to the past or future. finnCap accordingly disclaims to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

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