Credit Clear to acquire ARMA Group Holdings in $46m deal

Credit Clear ASX CCR ARMA Group Holdings
Acquiring ARMA Group will increase Credit Clear’s revenue by 140% to $26.5 million.

Technology company Credit Clear (ASX: CCR) has confirmed it will spend $46 million on the purchase of established Australasian debt collection service company ARMA Group Holdings.

The acquisition will accelerate Credit Clear’s growth by leveraging its scalable digital billing and communications technology platform across ARMA’s portfolio of more than 400 active clients.

It will also boost the company’s revenue by 140% to $26.5 million and its EBITDA (earnings before interest taxation depreciation and amortisation) to $3.9 million.

ARMA founders Andrew Smith and Shane Ashton will continue to manage the business as part of the Credit Clear Group and their employees will transfer over to Credit Clear.

Mr Smith will join the Credit Clear board as an executive director.

New markets

Credit Clear chief executive officer David Hentschke said the addition of ARMA’s senior sales force would open up new markets in metropolitan and regional New South Wales as well as New Zealand, and broaden its exposure beyond insurance and commercial to embrace the consumer, education and parking sectors.

“We are at the forefront of a major global transformation in the way businesses interact with their customers [and] this acquisition provides us with an opportunity to deploy our leading digital technology across ARMA’s existing client base and to win considerable new business together,” he said.

“It will accelerate top line growth and build on the success [we have] achieved in expanding the use of our digital platform … the management and senior staff of ARMA provide a very strong cultural alignment with [our company] and a strong foundation for the journey ahead.”

Terms of the deal

Under the terms of the acquisition, Credit Clear will pay 60% of the initial $46 million consideration in cash and 40% in scrip, and will be entitled to an earnout component based on client migration to its digital platform in the first 12 months following completion of the deal.

The transaction is expected to close in February following the satisfaction of conditions including obtaining approval from customers representing at least 60% of ARMA’s revenue to a pre-sale restructure being conducted by ARMA.

Capital raising

The cash component of the consideration will be funded by a $29.5 million capital raising which will see Credit Clear issue approximately 73.7 million new shares to existing shareholders at $0.40 each.

An initial tranche will issue approximately 33.7 million shares to raise $13.5 million, while a second will comprise 30 million shares for $12 million.

A share purchase plan will also be launched this month to eligible shareholders at $0.40 per share to raise up to an additional $4 million.

Bell Potter Securities will underwrite the placement and it is not conditional upon Credit Clear shareholders approving the acquisition.

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