Pro-Forma 2018 Revenue Outlook of $49 Million.
Pareteum Corp. (NYSE American: TEUM) and Artilium plc (AIM: ARTA) today announced that they have reached agreement for Pareteum to acquire Artilium. Under the terms of the acquisition, which have been further detailed today in an announcement issued under Rule 2.7 of the UK Takeover Code, each Artilium shareholder will be entitled to receive 0.1016 Pareteum shares and 1.9 pence in cash per Artilium share upon completion of the transaction. The acquisition values each Artilium share at 19.55 pence and the entire issued and to be issued ordinary share capital of Artilium at approximately $104.7 million (or £78.0 million), based on Pareteum’s closing share price of $2.33 on June 6, 2018 and the exchange rate of US$1.3413: £1.
The transaction has been approved by the Pareteum Directors and all of the independent Artilium Directors (the “Artilium Recommending Directors“). The two companies recognize that the businesses are a natural fit and that Artilium complements and extends Pareteum’s geographic footprint in Europe.
Artilium and Pareteum have since October 2017 benefitted from a strategic alliance entered into with the intention of jointly pursuing new and developed markets, accelerating growth and increasing market penetration for both Artilium and Pareteum. Since announcing the strategic alliance, the Pareteum Directors and Artilium’s Recommending Directors have been incredibly pleased by the way the businesses have successfully collaborated and by their customers’ enthusiasm for the partnership.
In the few months since the alliance was launched, the two companies have collaborated on at least 18 opportunities, resulting in 7 sales wins and an increasing pipeline of potential deals to pursue. Pareteum estimates that over $65 million has been added to its 36-month contractual revenue backlog as a direct result of the engagement.
The two management teams have also worked well together and proven to be highly complementary.
The transaction is expected to be significantly accretive to Pareteum’s non-GAAP earnings per share in FY2019(1), produce strong growth in pro-forma operating cashflow generation and provide material cost and revenue synergies.
Commenting on the acquisition, Robert H. Turner, Founder, Executive Chairman and Principal Executive Officer of Pareteum, said: “Artilium and Pareteum have a natural fit when considering the award-winning products and services that will be combined and offered, the expansion of addressable markets, making us truly global in reach, and the resulting improved executive and operating talent to lead our company to even higher achievements and results. Since October 2017, we have operated in a strategic alliance with Artilium, which has had materially positive results. We will now turn our attention to accelerating this as one company. It has been a pleasure and great honor to work with Jan-Paul Menke and Bart Weijermars to combine our companies. The vision of open mobility and open applications now takes a demonstrable leap forward.”
Commenting on the acquisition, Jan-Paul Menke, Non-Executive Chairman of Artilium, said: “Pareteum and Artilium make a powerful combination. Our Artilium shareholders are very pleased with this transaction. We have grown Artilium with several well selected transactions, in addition to the sales and business development achievements we have produced. With the now significantly enhanced operating capabilities of the combined companies, we expect even more opportunities to become available and further improve the outlook for shareholder growth and value to be reflected in our business. Bart and I have had a positive and constructive experience in working with Robert H. Turnerand his Pareteum “TEUM” to now create a very powerful platform company, and, it is one that we feel has the capability for significant future growth.”
Pareteum believes that the ongoing participation of Artilium’s CEO, Bart Weijermars, in the Artilium group and, in turn, the Pareteum group, is an important element of the acquisition. Therefore, effective on completion of the acquisition, he will be engaged as Chief Executive Officer of Pareteum Europe and Artilium as wholly owned subsidiaries of Pareteum.
The Directors of Pareteum and the Artilium Recommending Directors intend to recommend unanimously that their respective shareholders approve the transaction. The transaction is currently expected to close in September 2018, subject to the satisfaction of certain conditions including approval by Pareteum’s stockholders of the issuance of shares of common stock in connection with the acquisition and approval by Artilium’s shareholders of the scheme of arrangement under English law.
The Pareteum Directors and the Artilium Recommending Directors believe that the acquisition offers the opportunity for Pareteum stockholders and Artilium shareholders to benefit from the significant long term value creation that is expected to be unlocked by the combination, as well as offering Artilium shareholders a partial liquidity event.
The Pareteum Directors and the Artilium Recommending Directors believe the industrial logic for bringing the two companies together is underpinned by four key principles:
- Enhanced ability to acquire new customers with expanded product set.
- Significant potential to monetize customer bases through cross-sell and upsell.
- A larger platform from which to expand into new markets.
- Pro-forma FY2018 revenues of $49.0 million.(2)
- Carrier fee and cloud cost economies of scale.
- Reduction in corporate overheads and capital expenditures.
- Reinvestment of cost savings to support further growth.
- Enhanced financial profile with which to access the capital markets.
- Greater visibility with the investor community.
- Enhanced liquidity for Artilium shareholders.
- Strong platform for acquisitions and market consolidation.
- Significant pipeline of potential add-on M&A.
- Combined company will be the buyer of choice for many sellers.