Technology company AD1 Holdings (ASX: AD1) has announced it has received commitments to undertake a $2.5 million share placement to fund the acquisition of software-as-a-service (SaaS) provider Art of Mentoring.
The capital raising will result in the placement and issue of over 48 million new fully paid shares at $0.052 each to professional and sophisticated investors. This price represents an 11.2% discount to the volume weighted average price of AD1’s shares for the 20 days ending on 6 October.
The placement is being underwritten equally by the three AD1 non-executive directors for a total $1.5 million.
AD1 chairman Andrew Henderson said the fact that the board have the confidence to personally underwrite the capital raise is “reflective of the level of faith in the future of AD1”.
According to the company, strong endorsement from investors has resulted in oversubscriptions valued at about five times the underwritten amount (around $7.5 million), from which AD1 accepted a scaled back raise of $2.5 million.
The company also revealed two new small cap fund managers are participating in the placement.
“We are delighted to be able to complete the Art of Mentoring acquisition well within timelines, courtesy of this capital raise,” Mr Henderson said.
“We have already experienced customer referrals between the divisions, which validate the strategic merit of this acquisition and we look forward to completing this transaction and integrating the Art of Mentoring business in the coming months,” he added.
Art of Mentoring acquisition
AD1 signed documents last month to acquire 100% of the issued share capital of AoM Holdings and full beneficial ownership of its subsidiary Art of Mentoring to create a more diversified recurring revenue stream.
The Art of Mentoring SaaS business provides mentoring to organisations using evidence-based programs, expert consultations and software.
According to AD1, the business generates an annual recurring revenue stream totalling about $1 million and possesses “strong growth prospects”.
Under the terms of the deal, AD1 had agreed to issue a $1 million upfront cash payment and a further $500,000 in shares.
AD1 said funds raised from the placement will be used only for the acquisition and integration of Art of Mentoring, and as a reserve for future acquisitions.
The new shares will be issued within AD1’s 15% capacity under ASX ruling with settlement of the placement expected to occur on 16 October.