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- Acquisition enhances FFastFill’s market position in the Exchange Traded Derivatives and Over The Counter arenas
- Strengthens FFastFill’s US business, adding new Middle and Back Office customers and prospects in the important US derivatives market
- Opens up the opportunity to further enhance FFastFill’s global product suite
FFastFill (LSE: FFA), the leading provider of Software as a Service (“SaaS”) to the global derivatives community, is pleased to announce that it has entered into a conditional asset purchase agreement for the acquisition of the trade and assets of Chicago based technology consulting and software solutions business, WTD Consulting, Inc., (“WTD”) for a maximum consideration of up to $12.0 million (£7.6m) (the “Acquisition”).
Rationale for the Acquisition
The Board believes that WTD represents a highly complementary acquisition, which further strengthens FFastFill’s global position in the Exchange Traded Derivatives (“ETD”) arena. The addition of the business and assets of WTD positions the Company well to benefit from the significant regulatory changes taking place in the United States that are steadily driving the clearing of traditional Over the Counter (“OTC”) methods toward a central counterparty clearing model.
WTD has an excellent reputation in the US derivatives market and the business focuses exclusively on Post Trade Processing capabilities – or Middle or Back office – within the ETD and OTC derivatives market with both product (Prysm & iDash) and consulting offerings. WTD has a customer entity base of 30 including a number of global banks. The Acquisition also adds 39 members of staff based in Chicago. All WTD staff will be offered new employment contracts with FFastFill and some will continue to be deployed at customer sites.
This new technology and new team will strengthen FFastFill’s US-based business and enable the Company to complete the customisation required to take its Back Office product, “Eclipse,” in to the US market. WTD has extensive Post Trade Processing experience which will also be leveraged across FFastFill’s global customer base. The Middle Office customers of WTD’s “Prysm” will continue to be fully supported by FFastFill, whilst the functionality of “Prysm” is integrated into FFastFill’s “Seals” platform. WTD’s “iDash” customers will also be supported and, over time, the Company will look to provide a SaaS offering. With WTD’s experience in OTC systems, the Acquisition will improve FFastFill’s access and capability to address the emerging centrally cleared OTC market.
Terms of the Acquisition
The Acquisition comprises an initial consideration of $7.0 million (£4.5m) payable on completion (the “Initial Consideration”) and a deferred consideration of up to $5.0 million (£3.2m), which would be paid based on the achievement of certain performance objectives (the “Deferred Consideration”). The Initial Consideration will be satisfied by (i) the allotment to the vendors of 20,096,768 ordinary shares of 1 penny each (“Ordinary Shares”) and (ii) the allotment of 23,463,161 Ordinary Shares to such persons as Canaccord nominate pursuant to the Vendor Placing (as defined below). The Deferred Consideration would be paid 50% in cash and 50% in Ordinary Shares.
On a pro forma basis the WTD business generated revenue of $8m and operating profit of $1m for the year ended 30 June 2011. Revenue comprises software and development revenue (50%) and consultancy services (50%) covering business analysis and implementation. The Company expects the Acquisition to be earnings enhancing in the first twelve months.
The consulting business asset will be acquired by newly formed FFastFill Consulting, Inc., and the product and operation business assets by FFastFill Inc. Prior to the deal closing, customer contracts will be assigned to the two companies and new staff contracts will be signed.
Vendor Placing
Canaccord Genuity Limited and finnCap Limited have conditionally placed 23,463,161 Ordinary Shares, being 50% of the Initial Consideration (the “Placing Shares”), with institutional investors at a price of 9.5 pence per share (the “Placing Price”) (together the “Vendor Placing”). The Placing Price represents a discount of approximately 6.17 per cent. to the closing share price on 21 November 2011. The Vendor Placing is conditional, inter alia, upon completion of the Acquisition, which is expected to take place no later than 2 December 2011, and admission of the Placing Shares to dealing on AIM.
Application will be made for the Placing Shares, which will rank pari passu in all respects with the existing Ordinary Shares, to be admitted to trading on the AIM. It is anticipated that dealings in the Placing Shares will commence at 8.00 a.m. on 2 December 2011. A further announcement will be made when the application for the Placing Shares to be admitted to AIM has been made.
Commenting on the acquisition Keith Todd CBE, Executive Chairman said:
“This is an important step toward further strengthening FFastFill’s global position in the ETD market and will open up opportunities for us to drive additional growth. It will enable us to build on our significant existing strengths in SaaS and enable us to target that strength more forcefully at opportunities in the US marketplace.”
Hamish Purdey, Chief Executive Officer commented:
“I am delighted that the WTD team is joining FFastFill. WTD has an outstanding reputation in the industry and, by bringing both our teams and technologies together, we will provide a strengthened platform for us to continue our growth. I am confident that WTD will be a great asset to FFastFill in the next phase in our company’s development.”
