On 31 May 2019, Fintech Company, IRESS Limited (ASX: IRE) announced that it had acquired an established international market data provider, QuantHouse. Also, IRE believes that the acquisition of QuantHouse would be strategically aligned and highly complementary to IRESS’ business. Furthermore, the acquisition had been completed on 31 May 2019 through simultaneous signing, as reported.
The announcement read that the total purchase price would be up to €38.9 million (on a debt and cash free basis) along with a condition regarding earnout performance criteria through to the end of 2021, which is a material portion of the total purchase price.
IRESS’ Overview (Source: Company’s Investor Presentation, April 2019)
According to the announcement, QuantHouse is an international provider of market data services and trading infrastructure with a focus on Europe, North America and Asia, and it is providing over 145 data feeds to clients from exchanges and other data providers.
Andrew Walsh, CEO of IRESS, expressed the similarities in both the companies related to the strategy and future business. The acquisition would provide an additional international exposure to IRESS coupled with data to achieve cost synergies and scale. He also said that the acquisition would improve the client base globally and provide real-time access to further services coupled with tapping demand for data beyond desktops.
Additionally, he mentioned that QuantHouse would report a minor loss in 2019 and expects business to become EPS accretive by 2020 on the back of the greater scale and strategic advantage; meanwhile, the focus of IRE remains in achieving efficiency and revenue growth through the combined strength of both entities.
Reportedly, Mr Pierre Feligioni is the co-founder and CEO of QuantHouse and the person concerned with divesting his stake in the company. Also, he would continue to work in his capacity for QuantHouse within IRESS, and all the senior management, employees would be a core part of IRESS.
As reported, the total purchase price of acquisition would be €38.9 million (on a debt and cash free basis), and a material portion of the consideration would depend on earnout performance criteria through to the end of 2021. Also, the potential purchase price depicts less than 2x reported 2018 revenue of €21.2 million, and it expects to report a loss in 2019.
The acquisition is expected to be EPS accretive starting from 2020; however, once fully integrated with IRESS’ business expected synergies would be consequential to the EBITDA multiple of less than 10x, reportedly.
As per the release, the cost of acquisition is expected at approximately €1.5 million and integration costs of approximately €0.4 million, most of the cost would be reported as Non-Operating Items in 2019. Lastly, the acquisition would be funded by existing facilities, and post the transaction, the IRE remains conservatively geared with a leverage ratio of 1.5x Segment Profit.
By the end of the trading session, on 3 June 2019, IRE stock was at A$13.255, down by 2.608% from its previous close, with a market capitalisation of ~A$2.38 billion. The Year-to-date return of the stock is +26.02% along with three-month performance +11.28%.
Also Read: IRESS Announces ASX’s Exit From Its Shareholding.
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