Acquisition
FOR IMMEDIATE RELEASE 11 June 2007
SOPHEON PLC
DEFINITIVE AGREEMENT SIGNED FOR ACQUISITION OF
ALIGNENT SOFTWARE INC
ISSUE OF EQUITY
Sopheon plc ("Sopheon") announces today that it has signed a definitive
agreement to acquire Alignent Software Inc ("Alignent").
Based in California, USA, Alignent is one of only a few suppliers worldwide
that specialize in the provision of advanced product and technology roadmapping
software for complex global companies. Alignent's flagship offering, Vision
Strategist, is generally recognized as the leading application of its kind in
the marketplace. The software has a proven track record of helping large
organizations improve strategic innovation planning. Some of the foremost
aerospace, defense and high-tech companies in the world, including Boeing, BAE
Systems, Corning, Honeywell, Lockheed Martin, Motorola and NAVAIR have adopted
Alignent's offering as their strategic product planning solution.
Alignent's roadmapping software is an ideal complement to Sopheon's existing
product innovation process and portfolio management system. Vision Strategist
allows the user to visualize and predict how external market and technology
trends will impact product plans over time, enabling better decisions on future
product direction. A principal advantage of the software is that it improves
cross-functional communication and collaboration throughout the planning
process. Sopheon's Accolade® enhances the execution of product plans by
automating innovation process governance. Although the two applications will
continue to be marketed separately, together they will constitute industry's
first end-to-end strategic product planning software suite.
The acquisition of Alignent will help drive expansion of Sopheon's business in
two areas. First, for the company's nearly 100 existing clients in chemical and
consumer packaged goods markets, it will extend Sopheon's solution to include
strategic product planning. Secondly, Alignent's roster of industry-leading
customers offers Sopheon instant credibility, accelerating its entry into a
range of new markets, including aerospace, defense and high-tech.
Sopheon estimates that the acquisition will advance its product plans for
Accolade by a full two years. It will also result in a substantial increase in
the size of Sopheon's customer base. Initial feedback from Alignent customers
has left the Board highly confident that Sopheon can achieve significant
organic growth by selling its Accolade solution to existing Alignent clients
challenged with improving innovation process governance. Sopheon expects to
begin offering Accolade's product portfolio management capabilities to Alignent
customers this summer.
Upon the closing, Sopheon expects to take on an annual cost base of
approximately $2.4 million, and an annual recurring revenue base of maintenance
and software rental contracts of approximately $1.2 million. As noted above,
Sopheon expects to build on this revenue base by securing new sales of Alignent
software products both into Alignent's existing client base and into Sopheon's
client base, in addition to cross-selling Accolade into the Alignent customer
base. Sopheon expects the Alignent business to make a positive EBITDA
contribution from the first year following the acquisition. Alignent reported
audited revenues of $3 million and a $4.3 million net operating loss for the
year ended 31 December 2006. This was followed by extensive restructuring
activity after which the company was offered for sale.
Completion of the transaction is expected to take place on or about 18 June
2007 and is contingent upon the receipt of consents from the shareholders of
Alignent, and the completion and delivery of certain ancillary agreements and
formalities including the final debt documentation referred to below. The
maximum gross value of the acquisition before Sopheon's transaction expenses
amounts to $5.50 million, comprising $4.75 million initially upon closing and a
further $750,000 in potential earn-out payments. The initial consideration will
be reduced by net liabilities of Alignent that are assumed at the closing,
which are expected to be approximately $995,000. Accordingly, the initial cash
consideration is expected to be approximately $3,755,000.
The net liabilities assumed in the Alignent balance sheet upon closing are
expected to include approximately $200,000 in net book value of fixed assets
and $400,000 of cash and receivables, offset by approximately $650,000 of
deferred revenue, $470,000 of payables and $475,000 of professional fees
incurred by the sellers for a net total of $995,000 in net liabilities. To the
extent that the net liabilities assumed by Sopheon are greater than or less
than the estimated figure, the immediate cash consideration will be adjusted so
that the overall total value of the transaction upon closing remains $4.75
million. The transaction is subject to earn-out arrangements of up to $750,000
linked to the achievement of sales bookings (including contract renewals)
during the period between the closing and 31 December 2007. Any earn-out
payment that is earned by the former shareholders of Alignent would fall due on
or after 6 March 2008. Achievement of the earn-out objectives would increase
the first-year earnings contribution expected from Alignent.
The cash consideration, transaction expenses and working capital for the
combined group are being funded (i) by $3.5 million of new medium-term debt as
described below and (ii) by raising £2.1 million (before expenses) by the
placing of 12,000,000 Sopheon ordinary shares at 17.5p per share with financial
institutions in London. Application has been made for the new ordinary shares
to be admitted to trading on AIM and dealings are expected to commence on 12
June 2007.
The medium-term debt assumed of $3.5 million is to be provided by BlueCrest
Capital Finance LLC ("BlueCrest"), an existing lender to Alignent. The debt
will be repayable over 48 months and will bear interest at a rate linked to
certain US Treasury Note Yield rates at closing, and is expected to be between
10% and 11%. The debt will be secured by a cross-guarantee from Sopheon plc to
the acquired entity. BlueCrest has provided Sopheon with a commitment letter
for the debt and final documentation will be concluded prior to completion of
the Alignent acquisition. BlueCrest has also offered the enlarged group an
additional $750,000 revolving credit facility secured on accounts receivable.
At completion, the $1 million invoice discount facility currently in place with
Silicon Valley Bank will accordingly be terminated.
Barry Mence, chairman of Sopheon commented:
"Our acquisition of Alignent represents significant strategic value to Sopheon.
It will help us deepen our penetration in the chemicals and consumer goods
markets we currently target, while accelerating our expansion into new markets
such as high-tech and aerospace and defense, which offer great upside growth
potential. We expect substantial near- and long-term revenue benefits from the
transaction, as well as enhanced earnings on an ongoing basis. Given the
anticipated returns, the cost of these advances is low-less than 10% dilution
to our shareholders. This is a very positive move for our company, for our
clients and for our investors."
Dennis Clerke, chief executive officer of Alignent commented:
"Sopheon has already established strong market position as the premier provider
of software applications for innovation process governance. The addition of
Alignent's products, people and partners will enable it to deliver an unmatched
set of strategic product planning and implementation solutions to business and
R&D decision makers. This is an exciting development that will yield important
benefits not only to Alignent's customers, but to global manufacturers in all
sectors of industry."
For further information contact:
Barry Mence, Chairman Sopheon plc Tel: + 44 (0)1483 685735
Arif Karimjee, CFO
Sarah Wharry, Nominated Seymour Pierce Limited Tel: + 44 (0)207 107 8000
Adviser
Adam Reynolds Hansard Communications Tel: + 44 (0)207 245 1100
Andrew Tan + 44 (0)7957 203 685
Floor van Maaren Citigate First Financial Tel: + 31 (0) 205 754 010
About Sopheon
Sopheon (LSE:SPE) is an international provider of software and services that
help organizations improve the business impact of product innovation. Sopheon's
Accolade system automates and governs the innovation process, enabling
companies to increase revenue and profits from new products. Sopheon is listed
on the AIM Market of the London Stock Exchange and on the Euronext in the
Netherlands. For more information, please visit www.sopheon.com.