Ubisense Group plc Acquires Geoplan Interworks K.K.

Posted: 3rd December 2013 08:37

Ubisense Group plc ("Ubisense" or the "Company") (AIM:UBI), a market leader in real time location intelligence ("RTLI") solutions, is pleased to announce that it has entered into an agreement to acquire the entire issued share capital of Geoplan Interworks K.K. ("Interworks") (the "Acquisition"), a provider of location and infrastructure management solutions for utility, telecoms and manufacturing applications in Asia, for a maximum total consideration of ¥564.7m (£3.4m) (the "Maximum Consideration").
Acquisition Highlights
The Board of Directors of Ubisense (the "Directors") believe that the Acquisition will:
  • Provide Ubisense with enhanced geographic reach into the Asian market
  • Present opportunities to develop RTLI services business by deploying products and services to utility, telecoms and manufacturing companies in Asia
  • Provide local exposure and proximity to Japanese and Korean manufacturers
  • Afford cross-selling opportunities into an expanded customer base in Asia
  • Enhance Ubisense's product and services offering, particularly in relation to mobile applications
  • Strengthen and develop Ubisense's existing commercial relationships with customers such as Daifuku and the recently announced Asian headquartered automotive logistics group
  • Accelerate Ubisense's current business activities and new customer wins
  • Be break-even at the profit before tax level in the year ended 31 December 2014 and earnings enhancing in the year ended 31 December 2015
Commenting on the Acquisition, Richard Green, Chief Executive Officer of Ubisense, said:
"The acquisition of Interworks represents a significant step forward for the Company. We have long recognised Asia, and Japan and Korea in particular, as a huge market for our products and the acquisition will allow us to develop the market significantly from the initial base we have established with leading companies such as Mitsubishi, Hyundai, Honda and BMW Cherry."
Overview of Interworks
Headquartered in Tokyo, Japan, Interworks provides location and infrastructure management solutions, delivering products and services to customers in the telecoms, water supply, gas, electricity and manufacturing sectors. Its Japanese operations were established in 1997 and in recent years it has expanded into Korea and the Philippines.
Interworks' Chief Executive Officer, Tsunehiko Nishizawa, will remain within the enlarged group as CEO of the Asian operations.
Rationale for the Acquisition
The Directors believe that there is strong strategic rationale for the Acquisition as it provides the Company with a direct presence in Asia, one of its key growing markets. This is particularly important given forthcoming changes to Japanese radio regulations which will allow the sale of Ubisense products in the Japanese market from 2014. Ubisense and Interworks have already worked together, with Interworks completing the Hyundai installation in Korea. The Acquisition will enable Ubisense to develop and strengthen its existing strategic relationships with original equipment manufacturers ("OEMs") such as Daifuku, and the recently announced Asian headquartered automotive logistics group as well as target new customers, in particular Japanese and Korean manufacturing companies.
Furthermore, the Acquisition affords opportunities to cross-sell Ubisense's existing products and services, as well as to provide implementation and support to the enlarged group's customer base such as BMW Cherry, Hyundai and KEPCO. The addition of Interworks' customer relationships is expected to create new areas of growth for the enlarged group as well as enhance existing client relationships. There is also the additional opportunity to augment Ubisense's product offering within its existing client relationships through the availability of specific Interworks product applications.
The Acquisition provides diversification benefits to Ubisense by improving the Company's revenue mix in terms of exposure to sectors, geographic distribution and software applications. The Acquisition provides Ubisense with a strong presence in Asia and a complementary product offering, from which the enlarged group can accelerate its current business activities in this region.
The Acquisition is expected to be break-even at the profit before tax level in the year ended 31 December 2014 and be earnings enhancing for the year ended 31 December 2015.
Terms of the Acquisition
Under the terms of the Acquisition, Ubisense will purchase the entire issued share capital of Interworks from the selling shareholders ("the Vendors") for a Maximum Consideration of ¥564.7m (c. £3.4m). This is made up of an initial consideration of ¥416.0m (c. £2.5m) (the "Initial Consideration") and a deferred consideration of up to a maximum of ¥148.7m (c. £0.9m) (the "Deferred Consideration").
The Initial Consideration consists of ¥130.7m (c. £0.8m) in cash at Completion (the "Cash Consideration") funded through Ubisense's existing debt facility, and ¥285.3m (c. £1.7m) to be satisfied through the issue of 759,809 new ordinary shares of nominal value of £0.02 in Ubisense (the "New Ordinary Shares") at a price of 225.25 pence per ordinary share, being the average of the volume weighted mid-market closing price on each of the preceding five business days, and equating to approximately 3.3% of the enlarged issued Ubisense share capital (the "Share Consideration").
The Deferred Consideration consists of a maximum of ¥61.6m (c. £0.4m) in cash that will become payable to the Vendors if certain  profit based targets are met in the year to 30 June 2014 and a further maximum of ¥87.1m (c. £0.5m) cash will become payable if certain revenue and profit based targets are met in the calendar years 2014, 2015 and 2016.
Interworks comprises wholly owned subsidiaries in Korea and the Philippines, and a 77% owned subsidiary in Japan (the largest entity in the group). Interworks has an option to acquire an additional 18% in the Japanese subsidiary until May 2015 for ¥113.0m (c. £0.7m).
The Vendors are comprised of Tsunehiko Nishizawa, the Employee Share Plan, certain directors of Interworks and certain other selling shareholders.
Application has been made for the admission of 759,809 New Ordinary Shares to trading on AIM. It is expected that dealings in these New Ordinary Shares, which will rank pari passu in all respects with the existing ordinary shares of the Company, will commence on 6 December 2013. Following the issue of the New Ordinary Shares, the issued share capital of the Company will comprise 23,068,105 ordinary shares.
Lock-up Restrictions
Tsunehiko Nishizawa is subject to certain lock-up restrictions in relation to the New Ordinary Shares in Ubisense that he has received as part of the Share Consideration.
Financial Information
For the financial year ended 30 June 2013, Interworks generated consolidated revenues of c. ¥900m (c. £5.4m) and a consolidated loss before tax of c. ¥64m (c. £380,000). As at 30 June 2013, Interworks had consolidated net assets of c. ¥380m (c. £2.3m) and consolidated net cash of c. ¥400m (c. £2.4m).
Debt Facility
Under the current banking facility (the "Debt Facility") with HSBC Bank plc the Company has £2m available for draw down to fund the Cash Consideration of the Acquisition. The Debt Facility allows the Group to draw down up to a maximum of £5m at an agreed rate of 3% above LIBOR and is due to expire in 2016.

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