Archtis (ASX:AR9) acquires Cipherpoint’s (ASX:CPT) European operations

Highlights

  • archTIS acquires technology assets and the European operations of Cipherpoint’s software division.
  • The acquisition provides archTIS with a unique data discovery and encryption technologies.
  • The transaction features A$1.4 million cash to be paid along with A$200K of the initial purchase price held in escrow. Also, an additional A$1 million will be paid on total contract values.

Cyber security company ArchTIS Limited (ASX:AR9) has agreed to purchase select assets of Cipherpoint Limited (ASX:CPT) software division and European operations.

The assets comprise the intellectual property rights to ‘cp.Protect’, Cipherpoints’ advanced SharePoint protection solution and ‘cp.Discover’, a data discovery and classification platform by Cipherpoint. AR9 has also taken over certain European operations and its sales and development staff, who will now join AR9.

Agreement details

ArchTIS Limited shall pay as purchase price-

  • An initial AU$1.2 million in cash on completion, and 
  • Up to AU$200,000 in tranches upon assignment of select contracts, 
  • Further, up to AU$1 million shall be paid as deferred consideration via issuance of shares after 31 March 2022.
  • AR9 will also assume certain liabilities relating to employees of CPT moving to work for it.

While immediately adding to earnings, CPT acquisition represents excellent value for AR9 shareholders, i.e., at ~3.8x of acquired annual recurring revenue.

Acquisition rationale

The acquisition will provide AR9 with a suite of data-centric products to support customers using Microsoft. Solutions getting added to AR9 services will provide for on-premises, hybrid and cloud deployments and also assist the company is growing its annual recurring revenues. Additionally, being a strategic move ArchTIS will acquire unique encryption technologies that can be upsold and cross-utilised within its existing Microsoft technology stack.

Moreover, CPT staff will enter AR9’s European and American offices and bolster its sales efforts there. The acquisition will also help deliver solutions to many long-serving, high profile customers and extend its markets in Europe and Singapore.

AR9 shares have dipped over 7% and are trading at AU$0.360 per share, CPT shares are stable at AU$0.033 per share at 3:00 PM AEST.

Bottom line 

The acquisition brings in opportunities for ArchTIS for better deliveries in Europe and Singapore. CPT acquisition also adds to its sales force, which is expected to drive up revenues in the future.

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