Technology company, Appen Limited (ASX: APX) is a significant participant in machine learning and artificial intelligence market. The company helps other businesses in developing and enhancing products that rely on natural languages and machine learning.
On 11 March 2019, Appen Limited announced the strategic acquisition of a best in class machine learning software platform, Figure Eight Technologies, Inc, which materially increases the quality of Appen revenues and the breadth of its customer base.
This acquisition will put Appen in a strong position to deliver the increasing volume, quality and speed requirements for high-quality training data. Further, this acquisition will also allow Appen to combine the scale, quality and language expertise of its leading global crowd with Figure Eight’s innovative data annotation platform to create a unique and valuable end-to-end training data solution.
Appen Limited has entered into a binding agreement to acquire Figure Eight Technologies, Inc. for total upfront consideration of US$175 Mn. Appen Limited has also agreed to pay the vendors earn-out consideration capped at US$125 Mn which is payable in March 2020. Appen is expecting to pay an earn-out amount of US$60-80 Mn which is representing a 5.1-5.4x multiple of incremental budgeted revenue in FY 2019.
The upfront cost, as well as the transaction costs of the acquisition, will be funded through an A$285 million fully underwritten placement to institutional shareholders at an offer price of A$21.50 per new share. The offer price of A$21.50 is representing 11.8 percent discount to the last closing price ASX on 8 March 2019, being A$24.37.
To fund the earn-out payment of the Acquisition, the company has entered into a commitment with a syndicate of leading global and Australian banks for around US$125 million of new debt facilities that are expected to be drawn down in March 2020.
After completing the Placement, the company will conduct an offer of New Shares under its Share purchase plan to existing shareholders in the Company which will provide each eligible shareholder with an opportunity to apply for up to $15,000 of new shares in Appen at the lower of
(i) the Placement Price of $21.50 and
(ii) the price that is a 2 percent discount to the VWAP (Volume Weighted Average Price) of Appen shares on ASX over the 5 trading days up to, and including, the closing date of the SPP. It is expected that the Share Purchase Plan will raise around A$15 Mn.
Before releasing the announcement regarding the acquisition and capital raising, the company had requested ASX to put their securities in a trading halt. The trading halt was requested to avoid trading taking place on an uninformed basis and to allow the institutional placement to take place in an orderly manner.
In the last six months, the share price of the company increased by 72.35% as on 8 March 2019. APX’s shares last traded at $24.370 with a market capitalization of ~$2.6 billion as on 11 March 2019 (AEST 12:29 PM).
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