- Internet and IT company Over the Wire (OTW) is buying up cloud solutions specialist Digital Sense Hosting for a potential $39 million
- OTW will cough up $27 million in a mix of cash and scrip upfront, with a potential $12 million on the table for Digital Sense if it can hit key revenue and earnings targets over the next two years
- OTW said Digital Sense’s cloud service provide cross-sell opportunities for the businesses to offer OTW services to Digital Sense customers and vice-versa
- To fund the deal, OTW has raised $20 million by placing five million new shares to institutional and sophisticated investors at $4 each
- The company is tapping retail investors for an extra $5 million in a share purchase plan at the same price as the placement
- Shares in OTW tacked on a neat 9.15 per cent today to close worth $4.65 each
Internet and IT company Over the Wire (OTW) is buying up cloud solutions specialist Digital Sense Hosting for a potential $39 million.
The company announced the purchase in tandem with a major capital raise today. Under the purchase deal, OTW will make an upfront payment of $27 million to take control of Digital Sense, with $21.6 million to be paid in cash and the remaining $5.4 million in OTW shares.
However, the deal comes with deferred payments of up to $12 million based on key performance milestones. The sellers will pocket another $7 million in the 2021 financial year and $5 million in the 2022 financial year if they can hit growth targets based on revenue and earnings.
Digital Sense pulled in roughly $18.3 million in revenue and $5.4 million in earnings before interest, tax, depreciation and amortisation (EBITDA) over the 2020 financial year.
Why the buy?
OTW said Digital Sense is a leading Sovereign Cloud platform provider in Australia.
Digital Sense offers solutions in a range of important telco areas including Infrastructure as a Service (IaaS), Desktop as a Service (DaaS), Storage as a Service (STaaS), and Data Protection as a Service (DPaaS).
OTW said this, combined with Digital Sense’s cloud services offering, will bring about further diversification of revenue for the company. Moreover, the cloud solutions give OTW cross-sell opportunities to offer Digital Sense services to existing OTW customers, and vice-versa.
OTW Managing Director Michael Omeros said the company is excited to onboard the Digital Sense team.
“Digital Sense is a high-quality cloud business that delivers customisable and scalable cloud solutions to enterprise and government customers,” Michael said.
“The cloud solutions industry is expected to benefit from tailwinds based on digital transformation, with Digital Sense well-positioned to capitalise on the industry’s strong growth outlook,” he added.
Raising capital
To fund the buy, OTW has placed five million new shares to intuitional and sophisticated investors at $4 each — a slight 3.4 per cent discount to the company’s 10-day volume-weighted average price.
However, the company is tapping mum and dad investors for an extra $5 million.
OTW has launched a share purchase plan under which eligible retail shareholders can subscribe for up to $30,000 worth of new shares at the same price as the placement.
The share purchase plan will open on Friday, October 9, and close on Monday, October 26.
It seems investors liked today’s deal, with OTW shares tacking on a neat 9.15 per cent and closing worth $4.65 each. The company has a $240.18 million market cap.