IOUpay says IOU less under revised terms of IDSB acquisition

IOUpay has announced the revised tranche two completion terms for Malaysian finance compay IDSB, which will see less capital invested for a smaller stake and more favourable terms.

Malaysia-focused fintech IOUpay (ASX:IOU) has announced it has revised the terms of its investment in I.Destinasi Sdn Bhd (IDSB) effective August 31, 2022.

The revised terms of IOU’s investment follow a recent successful renegotiation and variation of the total investment acquisition terms of IDSB through amendments to the second tranche payment completion terms.

Background to deal

IOUpay announced in September 2021 that it had executed a binding Share Purchase Agreement (SPA) through its wholly owned subsidiary IOU Pay Asia Sdn Bhd to acquire 42% of the total issued capital of IDSB for cash consideration of up to RM126 million (~AU$40.5 million).

IDSB is a specialised finance company focusing on providing instalment-based consumer credit services to civil servants for and on behalf of Malaysian banks.

IOUpay’s stake in the Malaysian specialised finance company is considered a milestone for the company, opening doors to big customer networks of national retail banks and enable it to access high credit quality civil servants.

The SPA was executed by the shareholders of IDSB, Jiraniaga Sdn Bhd (JSB) and Dato Zainalabidin Mohamed Husain (DZA) (together the vendors) and IOUpay Asia.

The Purchase Price was to be paid in two tranches. Tranche one completion was 50% of the Purchase Price of RM 63 million (~A$20.3 million) in return for 21% of the issued capital.

Tranche two completion required IOU to pay the balance of the 50% of the total purchase price subject to adjustment for IDSB’s audited financial performance for the 12-month financial year to December 31, 2021, in return for the remaining 21% of issued capital.

The first tranche completion of RM63 million was funded from IOU’s existing cash holdings and was formally completed on 20 December 2021 with the registration of transfer of shares to IOUpay Asia.

In June IOU announced that IOUpay Asia and the vendors had agreed to extend the date for settlement of the second tranche payment to no later than August 31, 2022. However, under the new terms that date has also been pushed out.

IOU’s funding for tranche two completion has already been paid into a solicitor’s trust account from existing cash reserves and therefore completion of the entire IDSB acquisition won’t require further capital investment or outlay by IOU.

IOUpay Asia lowers price for reduced stake

The revised acquisition terms include:

Agreement with vendors to reduce IOU’s total acquisition of IDSB to be 34% at completion (8% reduction from 42%) in return for an RM12.18 million (A$3.92 million) cut in total completion payment due
Second tranche payment to be amended and fixed to RM9.5 million (~AU$3.1 million) to RM72.5 million (~AU$23.3 million)
Second tranche completion varied to be a 13% increment to IOU’s existing 21% holding
Timing of second tranche completion to be linked to vendors obtaining additional certainty of IDSB’s ability to deduct loan instalment/payments from federal government servants
Nearly AU$4 million additional working capital to progress IOU’s business strategy roadmap as announced 21 July 2022
Confirmation that all funding for full completion of IDSB has been provided for by IOU.

IOUpay recently reported strong transaction volumes for the first half of the September quarter (July 1-August 15).

The company reported more than $7 million in total transaction value (TTV) was recorded for myIOU BNPL, delivering ~$415k in net transaction revenue (NTR).

The company continues to see growth in consumer and merchant sign-ups, approval and onboarding since its June 2021 launch including cumulatively.

This article was developed in collaboration with IOUpay, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.