IOUpay (ASX:IOU) announces revised terms to IDSB investment completion

Highlights

• The agreement for the acquisition of IDSB shares by IOUpay was amended effective 31 August 2022.
• The investment has been reduced to a 34% stake (down from 42%).
• The total purchase price is now RM72.5 million (~AU$23.3 million) as compared to the RM84.7 million (~AU$27.2 million) adjusted purchase price determined in June.
• The revised terms provide IOU with nearly AU$4 million additional working capital to progress its business strategy.

IOUpay Limited (ASX:IOU), a leading fintech and digital commerce solutions provider, has made an announcement with respect to its investment in I.Destinasi Sdn Bhd (IDSB). The terms of investment as agreed to by the parties have been revised effective 31 August 2022.

The amendment is in the tranche two payment terms of the deal. IOUpay has stated that its investment in IDSB would now represent an ownership of 34% of the latter company’s issued capital. For this ownership, IOUpay’s total investment would amount to RM72.5 million, equivalent to nearly AU$23.3 million.

Under the original terms, the parties had agreed to a cash consideration of up to RM126 million (~AU$40.5 million) for 42% of the total issued capital of IDSB.  The purchase price for the full investment was adjusted in June this year to RM84.7 million (~AU$27.2 million) via an adjustment mechanism in the original agreement.

The revised terms provide almost AU$4 million additional working capital and certainty to progress the company’s business strategy roadmap. IOUpay is focused on tapping the fast growth and adoption trends in digital payment solutions across the Southeast Asia region.

Learn more about IOU’s business strategy roadmap

Overview of IOUpay and IDSB deal

In September last year, IOUpay updated on the binding Share Purchase Agreement (SPA) via IOU Pay (Asia) for the acquisition of 42% of IDSB’s total issued capital. IDSB, Jiraniaga Sdn Bhd, and Dato’ Zainalabidin Mohamed Husain were together “vendors” in this SPA. For this acquisition, the cash consideration was set at up to RM126 million, equivalent to AU$40.5 million.

This consideration was to be paid by IOUpay in a couple of tranches. The first tranche included half the amount of RM63 million in return for IDSB’s 21% issued capital. The tranche two payment for 21% of issued capital was subject to adjustment for audited financial performance of IDSB pertaining to 12-month financial year through 31 December 2021. It was payable by the completion of the audit or six months after first tranche payment, whichever was later.

The first tranche was completed on 20 December 2021 from the existing cash holdings of IOU, resulting in the transfer of the shares that represented the agreed issued capital of IDSB. The date for settlement of the second tranche was extended to no later than 31 August 2022 after an agreement between IOUpay Asia and the Vendors.

Payment of Second Tranche

Under the revised terms, the amount for the tranche two now stands at RM9.5 million, equivalent to nearly A$3.1 million. This figure denotes a reduction in RM12.18 million (approximately AU$3.92 million), in cash investment for an overall 8% decrease in the aggregate purchase of IDSB’s issued capital by IOUpay.

IOU has already allocated the required funds for the second tranche to an escrow account with its lawyers pending the completion of the deal. The company has stated that no further cash investment will be required in this regard.

IOU has also stated that it would duly inform the markets regarding the timing and release of the said funds.

IOU shares were trading at AU$0.070 midday on 6 September 2022, up nearly 3% from the last close.