Payments provider Transaction Solutions International (ASX:TSN) has shifted focus from India to Australia with a $5.1 million cyber security acquisition.
The $21 million fintech company announce today it had bought Sydney-based Decipher Works.
The share price rose 10 per cent to 1.1c in intraday trading after the announcement.
Chief Jeffery Lai told Stockhead he had originally intended to buy the remaining 75 per cent of TSI’s Indian operation (TSI India) from private equity firm CX Partners.
But India’s drastic demonetisation policy in December 2016 — purging all 500 and 1000 rupee banknotes from circulation — sent revenue and transaction numbers south.
Lai says he won’t reconsider an acquisition of TSI India until those numbers – which CX Partners don’t want public – return to pre-demonetisation projections.
TSI chairman Gary Foster said earlier in a statement: “While I personally have a great attachment to TSI India and belief in the management team, shareholders need to receive the best value we can provide them utilising the resources that we have.
“At the moment, given TSN’s size and resources, we consider acquiring a company at 3.6x EBITDA is a better use of shareholder funds and resources.
“Should TSN be able to increase its value and its share price, the TSI India transaction becomes more attainable and attractive for TSN shareholders.
“TSI management have much in their pipeline, and ideally we want to be part of this in some form.”
Decipher Works was a “common sense” strategic move for the company, Lai said.
“We wanted to create more options for shareholders and for the company,” he told Stockhead. “We’re hoping to grow [Decipher Works].
“We think that we are able to grow them more rapidly than in the past, so we will put [Decipher] onto a grow trajectory.”
Lai flagged more acquisitions in the cybersec space, which would mostly be bought with scrip. A TSI India buyout would require a capital-raising.
Decipher offers services such as identity governance, access management, multi-factor authentication, data security, single sign-on, threat detection and security managed services solutions.
The deal, split 61:39 per cent between cash and TSN scrip, buys the fintech a bank book of $1.8 million in cash and Decipher’s client base of banks and corporations.
The cash component of about $3.1 million will be paid in three stages over the next three months, and the scrip component at the end of that period.
The deal should be completed within a week because no shareholder approval is needed.