Acquisition and Placing

RNS Number : 4854J

Synchronica PLC

31 March 2010

 



Synchronica plc

('Synchronica' or 'the Company')

Acquisition of Instant Messaging Business and Placing

Synchronica plc, the AIM listed mobile email, instant messaging and data synchronisation provider, announces:

·    An agreement to acquire the IMPS instant messaging business of Colibria AS ('Colibria'), a leading mobile instant messaging company, including the technology and 13 contracts with mobile operators;

·     A Placing to raise £2.8m (gross); and

·     An Equity Swap Placing to provide the Company with further £2.0m funds over the next 24 months.

Acquisition of certain assets of Colibria

Colibria is a leading mobile Instant Messaging (IM) company providing mobile operators with a complete, scalable, standards-based IM and mobile social networking service.

In order to accelerate entry to the instant messaging market and to boost sales of the MessagePhone, Synchronica has agreed to acquire Colibria's IMPS technology and entire IMPS customer base.

The consideration payable by the Company to Colibria will be:

·     €750,000 in cash to be paid on the closing date, anticipated to be 21^st April 2010, of the Acquisition;

·     54,054,054 new Ordinary Shares to be allotted and issued on the closing date; and

·     72,072,072 new Ordinary Shares to be allotted and issued six months after the closing date.

Synchronica will continue to develop, market and support Colibria's open standards-based IM technology and plans to integrate the software into Synchronica's Mobile Gateway product. The Colibria IM client will also be pre-installed on the recently launched MessagePhone, a low-cost messaging-centric handset powered by Mobile Gateway.

Colibria's proven, carrier-grade mobile IM technology and emerging markets-oriented customer base complement Synchronica's focus on open standards-based messaging solutions for mobile operators in developing economies. Synchronica will use the acquisition as a springboard for cross-selling and up-selling opportunities as it seeks to further expand its market share in the rapidly expanding emerging markets. 

Specifically, the acquisition includes:

·     Transfer of 13 carrier contracts, including two large carrier groups with an addressable market of more than 320 million subscribers.

·     Transfer of certain Colibria employees to Synchronica ensuring continuous development of the acquired products and support for transferred contracts.

·     Transfer of reseller agreements with Nokia Siemens Networks and Acision related to the acquired products.

·     Colibria's Instant Messaging and Presence Service (IMPS), which provides a complete, scalable and OMA standards-compliant mobile operator messaging service.

·     Colibria's Windows Live Messenger Gateway, which allows users to mobilise their Windows Live Messenger service.

·     Colibria's Social Network Gateway, which enables operators to provide an interactive and inclusive mobile social network service as part of an integrated mobile experience.

·     Colibria's dedicated App Centre, a collection of 'software as a service' solutions designed to add instant value for the user and boost revenues for the operator through increased traffic, premium services and advertising.

Placing & Equity Swap Placing

The Placing comprises 111,600,000 Placing Shares placed at a price of 2.5p and will raise proceeds of £2,790,000 million, before expenses, for the Company. The Placing Shares will represent approximately 13.2 per cent., of the Enlarged Issued Share Capital and are expected to be admitted to trading on AIM on 22 April 2010.

The Company has also entered into a contract with an institutional investor, whereby the Company will issue, credited as fully paid, 80 million new Ordinary Shares to an escrow agent. In return the institutional investor will lodge £2 million of government bonds in an escrow account. Each month for the next two years the escrow agent will release to Synchronica a sum calculated by reference to the average mid market share price on the five business days at the end of the preceeding month. This market price will then be compared to the reference price of 3.3333 pence per share. The institutional investor will receive an initial fee comprising 8 million new Ordinary Shares issued as fully paid. The Equity Swap Shares are expected to be admitted to trading on AIM on 7 April 2010.

General Meeting and Recommendation

A General Meeting will be held at the offices of Simmons & Simmons, CityPoint, 1 Ropemaker Street, London EC2Y 9SS at 10.00am on 19 April 2010.  The Directors recommend that shareholders vote in favour of the Resolutions, as they intend to do in respect of their own holdings of Ordinary Shares, totalling 4,646,144 Ordinary Shares, being approximately 0.80 per cent. of the current issued share capital of the Company.

Enquiries:

Synchronica plc www.synchronica.com	Carsten Brinkschulte, CEO Angus Dent, CFO, Nicole Meissner, COO,	[phone] [phone] [phone]
FinnCap	Clive Carver , Nomad	[phone]
	Charlotte Stranner, Corporate Finance	[phone]
	Stephen Norcross, Corporate Broker	[phone]
Walbrook PR Ltd	Paul McManus	[phone] [phone] [e-mail]

About Synchronica

Synchronica plc is a leading developer of next-generation mobile messaging solutions based on open industry standards. The award-winning product portfolio includes the flagship product Mobile Gateway, providing push email, synchronization, instant messaging, backup & restore and mobile connectivity to social networks. Synchronica's products are white-labeled and offered by mobile operators in emerging and developed markets to provide mass-market messaging services, increasing data revenues and reducing churn.

Synchronica's Mobile Gateway provides a unique multi-protocol gateway combining Push IMAP, SyncML, ActiveSync, Email-to-MMS and Email-to-SMS, delivering push email and synchronization to literally any mobile phone currently in the market without requiring an additional client to be downloaded. Expanding Instant Messaging to mobile devices, Mobile Gateway establishes carrier-branded IM communities using the industry-standard XMPP and provides gateways to popular Internet IM communities connecting any IMPS enabled handset.

Headquartered in England, Synchronica also maintains a development centre in Germany, in addition to a regional presence in the USA, Hong Kong and Dubai. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.L). For further information please visit www.synchronica.com.

The information below is taken from the Circular to be sent to shareholders on 31 March 2010. Full details of the Circular are available on the Company website: www.synchronica.com

1.             Background and Rationale for the Acquisition

In February 2010, Synchronica in collaboration with Brightstar, a multi-billion dollar mobile handset distributor and KCM Mobile, a Korean handset manufacturer, launched MessagePhone™, a new low-cost messaging device which offers advanced features such as push email and synchronisation services, mobile instant messaging ("IM"), a full HTML web browser and access to social networking sites. The devices are bundled with Synchronica Mobile Gateway, which provides the messaging and synchronisation infrastructure software. The Company has already announced two purchase orders for MessagePhone devices from mobile operators in Africa and Latin America.

The Company also introduced Mobile Gateway 5 in February 2010 which is a complete next-generation mobile messaging suite that enables operators to offer push email and synchronisation, instant messaging, social networking services and web-feeds to consumers and business users, regardless of the handset they use. Mobile Gateway 5 enables operators to provide a broad range of mobile messaging services from a single platform aimed at increasing data usage and subscriber loyalty. It connects users to existing internet communities such as Facebook, Google Mail/Talk and web-feeds, driving traffic and user uptake but also enables operators to create their own email and instant messaging communities, creating the "stickiness" that reduces churn.

In order to accelerate entry to the instant messaging market and to boost sales of the MessagePhone, Synchronica has agreed to acquire Colibria's IMPS technology ("the Acquired Technology") and entire IMPS customer base ("the Acquired Contracts"). The Acquired Contracts will add scale to Synchronica's business by expanding the Company's customer base with 13 additional contracts. In particular, the Acquired Contracts include group-wide framework agreements with two large-multi-national mobile operator groups, which provide a combined addressable market of more than 320 million subscribers. The Acquisition also provides Synchronica with upselling potential by offering Mobile Gateway to Colibria's installed base of mobile telecoms operators and Acquired Technology to Synchronica's customer base. In addition, there is the potential for Synchronica to generate more revenue by using the Acquired Technology in the MessagePhone and accelerating sales of the low-cost device to Colibria's installed base of operators.

2.             Details of the Acquisition

Synchronica has entered into the Asset Purchase and Licensing Agreement with Colibria. Under the terms of this agreement the Company has agreed to buy, and Colibria has agreed to sell, certain assets which form the IMPS business of Colibria. These assets include, inter alia, intellectual property rights, including software and a patent, certain IMPS customer contracts, certain reseller agreements, certain consultancy contracts and the shares held by Colibria in a company incorporated and located in the Philippines. Colibria has retained limited rights over some of the intellectual property relating to the worldwide use of that intellectual property for use in other products. Colibria has also agreed to grant a worldwide licence to the Company in respect of intellectual property rights to certain software, which is in addition to the acquired software described above.

The acquisition by the Company of the assets described above is conditional (amongst other things) on the passing of the Resolutions.

Subject to the passing of the Resolutions, completion of the Acquisition is expected to take place no later than the close of business on 21 April 2010. The consideration payable by the Company to Colibria pursuant to the Asset Purchase and Licensing Agreement will be:

·      €750,000 in cash to be paid on the closing date of the Acquisition;

·      the Initial Consideration Shares to be allotted and issued to Colibria on the closing date of the Acquisition; and

·      the Further Consideration Shares to be allotted and issued to Colibria six months after the closing date of the Acquisition.

Colibria will enter into an Orderly Markets agreement in respect of the Colibria Consideration Shares which will restrict Colibria's ability for a 12 month period to sell the shares without the prior agreement of the Company and FinnCap.

3.             Information on Colibria

Colibria is a leading mobile instant messaging company and provides a scalable, standards-based platform for operators and service providers to launch, develop and manage a complete operator community instant messaging service which includes SMS/MMS interworking and operator interconnect. It provides IM clients for a broad range of devices and works with built-in IM clients of the world's leading device manufacturers, including Nokia and SonyEricsson, providing an instant messaging gateway, instant messaging community, presence server and social networking integration.

Further information on Colibria can be found on their website www.colibria.com

4.             Equity Swap Placing

Under the terms of the contract which the Company has entered into with an institutional investor, the Company will issue, credited as fully paid, 80 million new Ordinary Shares to an escrow agent. In return the institutional investor will lodge £2 million of government bonds in an escrow account.

Each month for the next two years the escrow agent will release to Synchronica a sum calculated by reference to the average mid market share price on the five business days at the end of the preceeding month. This market price will then be compared to the reference price of 3.3333 pence per share.

If the market price is below the reference price a pro rata deduction of the monthly amount to be received by Synchronica will be made. Conversely, to the extent the market price exceeds the reference price a pro rata increase in the amount received by Synchronica will be made.

The institutional investor will receive an initial fee comprising 8 million new Ordinary Shares issued as fully paid.

6.            AxisMobile Shares

Under the share purchase agreement made between the Company and AxisMobile, dated 15 August 2008, relating to the acquisition of Axis Mobile Ltd., the Company is required to allot and issue to AxisMobile the AxisMobile Shares, as deferred consideration for the acquisition, on the fifteen month anniversary of completion of the Axis Mobile Ltd. acquisition. AxisMobile has agreed with the Company that the Axis Mobile Consideration Shares should be allotted and issued to them during April 2010.  The AxisMobile Shares are expected to be admitted to trading to AIM on 7 April 2010.

7.             Current Trading

The following section summarises the events of the first quarter of the year following the recent contracts and product updates.

US$203,000 Order for MessagePhone from Tier-1 Latin American Operator

As previously announced, the distribution partner for the MessagePhone has received the first purchase orders for devices from subsidiaries of tier-1, multi-national mobile operator groups in Africa and Latin America. The Company announced on 16 March 2010 that it had received the first purchase order from the distributor for Mobile Gateway worth US$203,000. Mobile Gateway will be bundled with the initial 20,000 devices being shipped to the customer in Latin America. Once the devices have been shipped to the customer, the Company will receive an additional 3% of the net device sales.

Sales Update

During 2009, the company announced 13 new contracts with mobile operators. Mobile Gateway revenues have increased by 175% between 2007 and 2008 and by a further 175% between 2008 and 2009. Mobile Gateway now represents the vast majority of the Company's revenues growing from £1.157m in 2008 to £3.1m in 2009. As announced on 16 March, 2010, the Company expects the revenue for the year ended 31 December 2009 to be approximately £3.8m.

The Company has begun the year with its largest sale to date of Mobile Gateway, as announced on 9 March 2010, worth US$ 1.05m with a distributor for one of Indonesia's largest mobile operators. The distributor will bundle Mobile Gateway with a range of mobile devices in a contractual commitment for 300,000 devices over a period of 12 months. At Mobile World Congress in February, the Company added more than 30 new operator prospects to its already strong sales pipeline for 2010. The Company has established global reseller agreements with tier-1 players including Nokia Siemens Networks, Brightstar and a further global, Asian headquartered Network Equipment Provider, complementing the Company's direct sales activities with global scale and local presence. During 2009, the Company won four new contracts from its reseller channel and expects this number to increase in 2010.

Mobile Gateway 5 Product Update

The Company announced Mobile Gateway 5, a new major version of its core product on 16 February 2010 and demonstrated the product to more than 40 prospective mobile operator customers at Mobile World Congress in Barcelona from 15 to 18 February. Mobile Gateway 5 significantly expands the product functionality and introduces support for instant messaging, social networking and newsfeeds in addition to push email and synchronisation. Initial feedback from existing and prospective customers has been very positive and the Directors of the Company believe that the new product will significantly improve the competitive positioning and will result in an increased conversion rate of prospects to customers as well as establish further up-selling potential to existing customers.

MessagePhone Product Update

The Company and its partners officially launched the new MessagePhone (www.message-phone.com) on 10 February  2010 in London. The launch of the MessagePhone represents a significant milestone for the Company as for the first time the Company's software products are bundled and pre-installed with mass-market mobile devices opening a new distribution channel and adding significant competitive advantage over software-only players. The launch event was well received and resulted in significant international media coverage in print and Internet publications which have generated several inquiries by prospective customers for the product.

Currently, the Company and its distribution partner are in extended discussions with several mobile operators for a launch of the MessagePhone bundled with the Company's Mobile Gateway product. The pipeline for potential new customers includes more than 30 mobile operators in Africa, Latin America and CIS and currently 20 mobile operators are testing the product.

8.             Details of the Placing

The Placing comprises 111,600,000 Placing Shares which are expected to be admitted to trading on AIM on 22 April 2010 and which have been placed conditional on, inter alia, the passing of the Resolutions to be proposed at a General Meeting of the Company. All the Placing Shares have been placed at the Placing Price with existing institutional shareholders and other new investors, including certain Directors. Subject to the passing of the Resolutions, the Placing as a whole will raise proceeds of £2,790,000 million, before expenses, for the Company. The Placing Shares will represent approximately 13.2 per cent., of the Enlarged Issued Share Capital.  The Placing Shares will be in registered form and capable of being held in certificated form or uncertificated form in CREST.

In the Placing Agreement, the Company has given FinnCap warranties and other undertakings and an indemnity which applies in certain circumstances and which are usual for a transaction of this nature.  In addition, FinnCap is also entitled to terminate the Placing Agreement at its absolute discretion in certain specific circumstances prior to Admission including, inter alia, a material breach by the Company of the terms of the Placing Agreement or of any of the warranties contained therein. The Company has also agreed to pay FinnCap a commission of 5 per cent. in aggregate on the gross proceeds of the Placing received by the Company and a £50,000 corporate fee.

The Placing is conditional, inter alia, upon the passing of the Resolutions, the Placing Agreement becoming unconditional and Admission, in each case by no later than 23 April 2010 (or such time and date as the Company and FinnCap may agree, being not later than 30 April 2010). The Placing is not being underwritten.

Certain Directors have agreed to subscribe for Placing Shares under the Placing as follows:

Director	Number of Existing Shares	Percentage of Existing Issued Share Capital	Number of Placing Shares conditionally subscribed for	Percentage of Enlarged Issued Share Capital
Angus Dent	1,000,000	0.17%	1,200,000	0.26%
Michael Jackson	0	0.00%	1,000,000	0.12%

9.             Requirement for Shareholder Approval

The Company wishes to extend its Directors' current authority to allow for the allotment of the Placing Shares for cash on a non pre-emptive basis.

In addition, as referred to above, the consideration payable for the Acquisition includes the issue of the Consideration Shares by the Company. This also requires an extension of the Directors' authority to allot Ordinary Shares.

Lastly, pursuant to the Companies Act 2006, with effect from 1 October 2009, there is no longer a requirement for a company to have an authorised share capital. It is therefore proposed to amend the articles of association of the Company by deleting the authorised share capital provision therein, which would otherwise act as a restriction on the number of shares which the Company may issue.

10.          General Meeting

In order to give effect to the Proposals, the Directors have convened a General Meeting. You will find set out at the end of this document a notice convening the General Meeting to be held at the offices of Simmons & Simmons, CityPoint, One Ropemaker Street, London EC2Y 9SS at 10.00 a.m. on 19 April 2010. At the meeting, resolutions will be proposed to the following effect:

i.             to amend the articles of association of the Company by deleting the provision relating to the Company's authorised share capital (Article 3 Share Capital);

ii.            conditional on the above resolution being passed, to authorise the Directors pursuant to section 551 of the Act (without prejudice to all subsisting authorities) to allot up to 330,000,000 Ordinary Shares; and

iii.           conditional on the above resolution being passed, to empower the Directors pursuant to section 571 of the Act (without prejudice to all subsisting authorities) to allot up to 330,000,000 Ordinary Shares for cash pursuant to the authority given in paragraph (ii) above as if section 561(1) of the Act (which relates to the pre-emption rights of existing shareholders) did not apply to the allotment, such disapplication is limited to the allotment of new Ordinary Shares pursuant to the Placing and the allotment of the Colibria Consideration Shares.

Subject to the passing of the resolutions and following completion of the Placing and the issue of the Colibria Consideration Shares, the Directors will have outstanding authority to allot up to 92,273,874 Ordinary Shares for cash on a non pre-emptive basis, representing approximately 10.9 per cent., of the enlarged issued share capital of the Company.

Action to be taken

A Form of Proxy is enclosed for use at the General Meeting.  Shareholders are requested to complete and sign a Form of Proxy whether or not they propose to attend the meeting in person.

Completed Forms of Proxy should be returned to The Company Secretary, Synchronica plc, Mount Pleasant House, Lonsdale Gardens, Tunbridge Wells, Kent, TN1 1NY, United Kingdom, as soon as possible and, in any event, by not later than 10.00am on 16 April 2010.

The lodging of a Form of Proxy will not prevent the shareholder from attending and voting in person at the General Meeting if he decides to do so.

Recommendation

The Directors consider the terms of the Proposals outlined above to be in the best interests of the Company and its Shareholders as a whole.  Accordingly, the Directors recommend that you vote in favour of the Resolutions, as they intend to do in respect of their own holdings of Ordinary Shares, totalling 4,646,144 Ordinary Shares, being approximately 0.80 per cent of the current issued share capital of the Company.

 

END

 

 

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