NEXION is on an acquisition spree, acquiring two established NZ tech firms that form a foundation in the Pacific, and a stepping stone to the Americas.

Global cloud service provider NEXION Group (ASX:NNG) has entered into binding term sheets to acquire New Zealand-based tech companies Aiscorp and Silicon Systems, the news sent shares soaring almost 18% today.

The acquisitions are expected to triple the size of NEXION’s pro-forma FY22 revenue to $18.3 million.

This latest move also represents the next phase of the company’s growth by forming a foundation in the Pacific region, as well as creating a stepping stone to the Americas.

It’s all part of NEXION’s stated strategy to become a truly global operator of Hybrid Cloud and SD-WAN infrastructure through a combination of acquisitions and organic revenue growth.

 

Acquisition cost

The acquisition costs have been determined to be the number of shares calculated at 1.1 times the FY22 revenue of the two combined companies, divided by 20 cents per NNG share. The NNG share price currently trades around 10c.

In addition, performance rights up to an additional 100% of the FY22 revenue divided by 20 cents will be issued to the vendors.

They will vest proportionate to whatever per cent the actual revenue achieved in FY23 is of the FY22 revenue. Based on historic performance, a minimum 23% of these rights might vest.

To put all this into perspective, Aiscorp and Silicon ’s FY22 revenue was $11.71 million, and EBITDA was $1.12 million (assuming an NZD/AUD exchange rate of 0.90).

As part of the deal, shareholders of Aiscorp and Silicon will also be allowed to take up to 42% of the valuation in cash.

“I’m extremely excited to have Aiscorp and Silicon join us on our journey to become a global hybrid cloud operator,” said Nexion CEO, Paul Glass.

“Aiscorp and Silicon are outstanding businesses with long histories of delivering services in the Pacific region, and will continue to operate as independent, complementary members of NEXION Group,” he said.

 

Established and trusted companies in NZ

Both targets are highly experienced IT and cloud infrastructure service providers in the region, with skills that could complement NEXION’s.

According to NEXION, their expertise and intimate local knowledge could combine extremely well with NEXION’s blue chip enterprise-scale client base, creating a foundation capable of delivering rapid growth and strong profits across the group.

Wellington-based Aiscorp was originally Artificial Intelligence Corporation when it was purchased by tech veteran Elmar Gailitis in 1987.

Gailitis transformed Aiscorp into a provider of IT infrastructure solutions, which has now grown into a full information technology managed services provider.

The company works across government and the private sector, and in particular delivers services to Pacific islands including Niue, Tonga and the Cook Islands.

Silicon Systems meanwhile is also from Wellington and was founded in 1991 by Liam O’Keeffe.

The company has developed a solid reputation as one of Wellington’s most established, trusted tech companies with a client base spanning government, corporate, and small to medium enterprise sectors.

To complete this deal, NEXION will be raising at least $7.425 million cash via debt and/or equity.

The company is in negotiations with an equity investor to provide up to $8 million in capital, and is also pursuing additional investment from existing shareholders.

Debt facilities of up to $2 million are also being considered for the second half of FY23, subject to the consolidated group demonstrating positive cash flow.

 

Expanding rapidly across the globe

NEXION is an IT provider which offers fully publicly integrated data storage as a service on a  Hybrid Cloud.

At the enterprise level, the cloud has saved trillions of dollars by enabling companies to scale up or down according to their computing requirements on a need-to basis.

For businesses of all sizes, it’s allowed a flexible technology infrastructure they couldn’t possibly have previously imagined at a cost they couldn’t dream of.

But NEXION not only provides the cloud, it also does the network connectivity for clients.

It’s a revolution that has made the Aussie-based provider become one of the companies to watch for on the ASX.

The company has been on an acquisition trail, recently acquiring Blue Sky Telecom which has extended its cloud coverage to remote locations by using satellite technology.

“NEXION has a vision to deliver services in eight global regions and the completion of these acquisitions sets the foundation for our second region called NEXION Pacific that spans the east coast of Australia to the west coast of North America,” said Glass.

“Our next step is Canada, so a base in Wellington makes acquisitions and growth into that time-zone much more efficient.”

 

This article was developed in collaboration with NEXION, 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.