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- FINEOS Corporation (FCL) has entered a trading halt, before announcing news of an acquisition and a $90 million equity raise
- FINEOS is a Dublin-based provider of software solutions for global life, accident and health insurance carriers
- The company will acquire software solutions provider, Limelight, for US$75 million (roughly A$104.8 million)
- Limelight has a highly-experienced team, product offering and client base which is set to bolster FINEOS’ presence in North America
- While FINEOS expects standalone revenue for FY20 to be 40 per cent higher at €87.8 million (roughly A$143.9 million) than FY19, it is still seeking the support of an equity raise
- FINEOS will launch an $85 million fully underwritten institutional placement through the issue of 20 million CDIs at an issue price of $4.26 per new security
- Additionally, FINEOS intends to raise up to $5 million through a security purchase plan (SPP)
- Eligible CDI holders may apply for up to $30,000 of new securities at the same issue price as the placement
- FINEOS will remain in a trading halt until Wednesday, August 12, with shares last trading for $4.59
FINEOS Corporation (FCL) has entered a trading halt, before quickly announcing plans for an acquisition and a $90 million equity raise.
FINEOS is a Dublin-based provider of enterprise software solutions for global life, accident and health insurance carriers. Its namesake platform provides clients with end-to-end administration, digital engagement, as well as analytics and reporting.
Acquisition explained
FINEOS has entered a binding conditional agreement with Limelight Health to acquire all of Limelight’s issued securities for a total of US$75 million (roughly A$104.8 million).
Limelight provides cloud-based quoting, rating and underwriting software to North America-based insurers.
Its Group Benefits Suite comprises eight-core platform components catered to sales workflows and management, broker portals, risk scores, rating engine, whole-case underwriting and business intelligence.W
FINEOS said acquiring Limelight aligns with its strategy of focusing on progressing its sales, marketing and product development in the North America market.
Specifically, Limelight has grown revenues by more than 38 per cent in the 2020 financial year, and 93 per cent of its target revenue for the 12 months to December 31, 2020, has already been contracted.
Limelight’s product offering and technology has also shown to be time and cost-efficient, provides further opportunities for sales and expanding FINEOS’ current offering and suite of capabilities.
“We have developed a strong relationship with the team and are highly confident that the complementary nature of our products and teams will further benefit our overall growth strategy and drive value for FINEOS shareholders,” FINEOS CEO Michael Kelly said.
“We expect the combined product suite will augment our existing capabilities by enabling us to better address the needs of global life, accident and health carriers,” he added.
Acquisition terms
Limelight shareholders may choose to receive their consideration in CHESS Depositary Interests (CDIs), cash or a combination of both. The issue price of the CDIs will be based on a 20-day volume-weighted average CDI price.
The company expects the CDI and cash mix will comprise around US$19 million (roughly A$26.5 million) in FINEOS CDIs and US$56 million (roughly A$78.2 million) in cash, subject to final vendor consideration elections.
It’s estimated Limelight shareholders will own roughly two per cent of FINEOS’ CDIs once the acquisition and subsequent equity raise have been completed.
As part of the acquisition, FINEOS will assume Limelight’s outstanding and unexercised options. These will be converted into FINEOS options to acquire FINEOS’ CDIs at equivalent value.
While the acquisition is expected to be completed sometime this month.
Financial position
FINEOS added eight new clients based in North America across the 2020 financial year.
The company expects to report standalone revenue of €87.8 million (roughly A$143.9 million) which is a 40 per cent increase from FY19.
Out of this, €29.5 million (roughly A$48.3 million) is software revenue and €58.3 million (roughly A$95.5 million) is services revenue.
Pro forma earnings before interest, taxes, depreciation and amortisation (EBITDA) is expected to be €15.6 million (roughly A$25.5 million) for FY20.
FINEOS will report its full annual result for FY20 on August 26.
Equity raise
The equity raise comprises of a fully underwritten institutional placement to raise $85 million, and a non-underwritten security purchase plan (SPP) to raise up to $5 million.
Under the placement, 20 million new fully paid CDIs over FINEOS shares will be issued to eligible institutional shareholders at an issue price of $4.26 per new security.
The placement price represents a 7.2 per cent discount to the last closing price of FINEOS CDIs of $4.59.
The new securities under the placement are expected to settle on Friday, August 14.
Once the placement has been completed, FINEOS will offer eligible CDI holders the opportunity to apply for up to $30,000 of new securities, free of transaction and brokerage costs.
The SPP won’t be underwritten and, like the placement, and the offer price will also be $4.26 per new security.
The SPP will open on August 17, and close on September 4.
While FINEOS’ shares will remain in a trading halt until Wednesday, August 12, with shares last trading for $4.59 on Monday, August 10.
