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Listed fintech Iress (ASX: IRE) will raise $170 million to strengthen its balance sheet and fund a proposed acquisition of funds management group OneVue (ASX: OVH).
Of the $170 million, $107 million will be used to acquire OneVue at 40 cents cash per share, representing a 67 per cent premium to OneVue's last closing share price.
Iress chief executive Andrew Walsh says the timing of the proposed acquisition came down to major shifts in the market.
"With structural shifts and changing market dynamics, our strategy is to continue to generate long-term growth opportunities, leveraging technology and automation, while helping to achieve efficiency, compliance and growth," says Walsh.
"The combination of OneVue's strength and position in administration of managed funds, superannuation, and investments, with Iress' strength in software and data will drive innovation through technology.
"OneVue has scaled in managed funds administration as the largest single third-party fund registry in Australia and there is opportunity to build on OneVue's business."
The full OneVue board of directors has given its unanimous support for the proposed acquisition.
The remaining funds leftover after the OneVue acquisition will be put toward strengthening Iress' balance sheet.
"While the acquisition was contemplated based on debt funding and could be achieved with available debt, we have decided to adopt a more conservative funding strategy given the current economic environment," says Walsh.
"Following the equity raising targeting $170 million and any successful acquisition of OneVue our net debt to Segment Profit (pro forma December 2019) would decrease to 0.92x.
"In the absence of this equity raising it would have increased to 2.0x (pro forma December 2019), which is higher than we would be comfortable with in the current environment."
The equity raise will be split into two tranches: a $150 million fully underwritten placement and a $20 million non-underwritten share purchase plan.
The placement will be offered to investors in Australia and overseas at $10.42 per share. This represents a 7 per cent discount to Iress' last closing price.
Approximately 14.4 million new shares will be issued post-raise, representing approximately 8.2 per cent of Iress' existing ordinary shares on issue.
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