Transaction Solutions International unveils plans to acquire Cloudten Industries

Transaction Solutions International (ASX: TSN) has unveiled plans to acquire Sydney-based cloud and cloud security services provider Cloudten Industries Pty Ltd for $8.6 million in cash.

Cloudten helps large companies and government bodies with migrating and managing their cloud infrastructure and is an advanced advance consulting partner of Amazon Web Services, which is a dominant global infrastructure-as-a-service provider.

The company’s core offerings include designing cloud architecture, optimising cloud infrastructure, troubleshooting, and migrating to Amazon Web Services. Its other capabilities comprise designing, deploying and managing cloud security architecture as well as ongoing security incident monitoring.

Cloudten generates 60% of its revenue through repeat business and recurring revenue, while 40% comes from one-off consulting projects.

The company generated $3.8 million in revenue in 2018 financial year, providing a before tax profit of $1.6 million.

Transaction Solutions claims the cloud sector’s growth is expected to continue into the next decade.

Acquisition terms

The $8.6 million acquisition has been broken up in to scheduled payments ranging between $1.1 million and $3 million over the following 12 months.

Additionally, performance-linked payments are also part of the sale.

To fund the acquisition, Transaction Solutions will carry out a $2 million capital raising by issuing 235 million shares at $0.85 each.

For every four shares that are subscribed to in the capital raising, investors will receive six free attaching options with various expiry dates from six months to 36 months and exercise prices ranging between $0.010 and $0.015.

Transaction Solutions plans to fund the first scheduled payment of $3 million through capital raising proceeds and its $1.7 million cash on hand.

According to Transaction Solutions, the other performance and scheduled payments will be funded through the exercised options and internal cash flow.

The acquisition is scheduled to be completed before the end of January next year.

By mid-afternoon trade, Transaction Solutions’ share price had gained 14.29% to $0.008.