ZipTel Limited (ASX: ZIP), an Australian owned and operated telecommunications business that offers international roaming and calling solutions to the consumers has entered into a binding agreement to acquire all the issued share of Douugh Ltd.
Douugh Ltd is a purposed-centred financial technology company that takes proprietary artificial intelligence (AI) based method to disrupt the business model of banking, assisting customers to stay financially stronger.
It’s subscription-based financial wellness platform independently assists clients in paying sensibly, pay off debt, save more & build up wealth using a smart bank account along with a debit card
Under the binding agreement, ZipTel Limited would be acquiring all of the legal as well as beneficial interest in the overall issued share capital of Douugh by issuing 500,000,000 paid-up shares at a notional issue price of $0.02 each to the shareholders of the target company. The company will also issue 500,000,000 performance shares in ZipTel to the shareholders of Douugh Limited. The Performance shares would be converted into an ordinary share on a one-for-one basis on achievement the below-mentioned targets.
- 166,666,666 on achieving the timed performance milestone.
- Next 166,666,667 on attaining timed performance milestones.
- The remaining 166,666,667 on reaching timed performance milestones.
The company would be able to raise at least $3.5 million by issuing 175,000,000 Shares at $0.02 under a prospectus and can re-enter to the official listing at ASX. It can raise a maximum up to $5 million by issuing 250,000,000 Shares.
In this whole transaction, Canaccord Genuity (Australia) Ltd is performing the role of the Lead Manager.
Once the transaction gets completed, the name of ZipTel Limited would change to Douugh Limited (Proposed code ASX: DOU). Further, the present board members of the company would resign, and their positions would be taken up by new Board members whose names are as follows:
- Andy Taylor (Founder & CEO)
- Steve Bellotti (Non-Exec Chairman)
- Patrick Tuttle (Non-Exec Director)
- Bert Mondello (Non-Exec Director)
With this transaction, the nature and scale of the company’s activities would change from a telecommunications software company to a financial software and services company.
The company has started investigations related to the assets and liabilities, financial position and performance, the profit & loss along with the outlook of Douugh. The present Board of ZipTel is satisfied with the transaction as it is in the best interests of the company and its shareholders.
Further, the company would be taking up appropriate background checks of the proposed directors as well as other people before the appointment as directors as per the ASX Corporate Governance Council’s Corporate Governance Principles & Recommendations.
Terms and Conditions of the Transaction:
The execution of the transaction between both the parties is subjected to and depends on the satisfaction of the below-mentioned conditions:
- The transaction would be completed once both the parties (the acquirer and the target companies) complete the due diligence investigations.
- Approval from the shareholders of ZipTel in the proposed shareholder meeting during March 2020 or April 2020.
- The capital raising program is over.
- Both the parties involved in the transaction receive all relevant approvals. This includes approval from shareholders, Board, regulatory body along with any third-party consent that is required to implement the transaction.
- A compulsory 24 months escrow would be enforced on the founders and management. Douugh Limited would obtain that the balance of the existing shareholders of DOU says yes to a voluntary 12-month escrow period, this facility can be ignored by ZipTel at its choice.
- The transaction also depends on ZIP obtaining conditional approval for re-admission to ASX.
- Lastly, there should be no government or regulatory intervention which might prevent the execution of the transaction.
In case the company receives approval from the shareholders, it will issue a prospectus for capital raising and also apply for the re-admission to the ASX.
If the shareholders approve the transaction, the shares will remain suspended until the company meets the requirement mentioned in chapter 1 & chapter 2 of the Listing Rules.
Advantage of the Transaction:
The biggest advantage if the transaction gets completed is that the transaction would restructure the issued capital and net asset base of the company. It would provide working capital, a new board along with a new business direction.
The Directors of the company believe that the transaction would change the nature of the business to a financial software and services company which will provide value to the present & new shareholders.
Risks associated with the transaction:
As per the directors of the company, the transaction would be providing value to the shareholders but at the same time will have some inherent risks like:
- Competition risk.
- Regulatory risk
- Execution risk
- Marketing risk
- Fraud risk
- Financing risk
- Loss of key management personnel
Application of the Capital which is intended to be raised:
The proceeds coming in through the capital raising programme along with the present cash reserves would be used to provide the company with adequate working capital to fund the development of its operations, research & development along with the customer acquisition activities.
Below is the table which shows the breakdown of the usage of the proceeds:
Before the transaction, the company had issued 4 million shares at an issue price of 1.3 cents each to make up for director fees. These shares were approved by the shareholders at the 2019 Annual General meeting of ZIP.
On the other hand, Douugh has issued shares via a placement to institutional and sophisticated investors in the previous six months and was able to raise $1 million in pre-ASX listing funding programme.
Douugh proposed that it would enter into a converting loan agreement for $250,000 which would be used for scaling the business in preparation for ASX Listing. ZIP will fulfil the repayment of the loan the subject of the agreement at the conclusion of the transaction through the issue of shares at $0.02 for every share along with the payment of a 20% coupon.
Let’s take a look at the below Timetable which provides an idea of the date of various activities that would be undertaken by the company:
Please Note: The time provided by the company is subject to change as per exigencies.
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