Synchronica announces acquisi

RNS Number : 4918B

Synchronica PLC

18 August 2008

 



18 August 2008                    

Synchronica PLC

("Synchronica" or the "Company")

Synchronica to buy Axis Mobile Ltd. ("AxisMobile") and to raise £5.1m in institutional placings 

Landmark acquisition for Synchronica aims to build leading mass market mobile email and synchronisation solution provider 

Synchronica plc (AIM: SYNC), the mobile email and synchronisation specialist, is pleased to announce that it has entered a conditional acquisition agreement (the "Acquisition"), to acquire the operating subsidiary of competitor, AxisMobile plc (AIM: AXIS) (the "Vendor"). The Acquisition will be satisfied by the issue of 85,102,041 new ordinary shares of 1p each in the capital of Synchronica.

In order to fund the combined business, Synchronica announces that it has conditionally raised £5.1m in two institutional placings (the "Placings") by FinnCap. The Placings, supported by a number of existing and new investors, involves the issue of 169,466,399 new ordinary shares of 1p each (the "Placing Shares") at a price of 3p per share. 

The Acquisition and the Placings aim to create a well capitalised business and a market leader in mobile email and synchronisation solutions. Synchronica believes that the Placings and the Acquisition will accelerate the commercial growth and product development roadmap of Synchronica and increase its ability to provide email to the vast majority of handsets. This will in turn allow Synchronica to build an even stronger product and customer portfolio in emerging markets such as China, the Middle East, Latin America and Eastern Europe.

Synchronica believes that the Acquisition of AxisMobile gives it immediate access to technology necessary to better exploit the emerging markets opportunity complementing Synchronica's award-winning Mobile Gateway with a client-less solution for WAP phones, as well as 'email to SMS' and 'email to MMS' gateways enabling even the most basic phones to send and receive email. AxisMobile's patented Optimizer email transcoding gateway adds the ability to read a large variety of email attachments on a range of standard feature phones that would otherwise be unable to support such functionality. 

The Board believes that the Acquisition will accelerate Synchronica's commercial growth particularly in emerging markets. AxisMobile already has a strong footprint in Eastern Europe, Russia and CIS with eight operators live, whilst Synchronica has a strong sales presence in the Middle East, Asia and Latin America. With little or no overlap in the sales force, the combined business will target growth in the emerging markets with a particular emphasis on Asia, the Middle East, Africa, Latin America, Russia and Eastern Europe.

Acquisition and Placings Highlights: 

• Expands Synchronica's addressable market and accelerates its product roadmap and commercial growth aiming at establishing market leadership in mobile email and synchronisation for the mass market. 

• Integration of AxisMobile's technology including the email to SMS/MMS gateway and transcoding engine, which makes email and attachments available on low-end mass-market phones, will accelerate Synchronica's development roadmap further improving the competitive position of Synchronica's products.

• Combined products will enable Synchronica to offer mobile email to even the most basic devices in the consumer sector, further expanding its addressable market in particular in emerging economies. 

• Improved competitive position and removal of a direct competitor in the market of consumer mobile email should increase Synchronica's sales.

• Adding AxisMobile's customers is expected to accelerate Synchronica's commercial growth.

• Broaden Synchronica's customer base by adding eight live installations with substantial mobile operators including Russian operators MegaFon and MTS (the largest mobile network operator in Russia and the CIS) as well as large mobile operators in Switzerland and Germany.

• Up-selling Synchronica´s synchronisation software to AxisMobile's customer base and vice versa adds further commercial potential.

• Facilitates further sales in emerging markets and new territories as it adds sales staff servicing Europe, Russia and Latin America to Synchronica's sales forces in the UK, the USA, Dubai and Hong Kong.

• Additional funding of £5.1m will be used to integrate the products acquired from AxisMobile and accelerate the marketing and sales of the combined business. 

Through its live installations with mobile operators, AxisMobile today has approximately three million end users worldwide with an exposure to more than 300 million subscribers. AxisMobile currently has eight live customer installations with major mobile operators, predominantly in Central and Eastern Europe. Customers include: MTS (the largest mobile operator in Russia and the CIS with more than 84 million customers), Megafon (a Russian mobile network operator with more than 34 million customers across 88 regions of the Russian federation with its Moscow subsidiary Sonic Duo), T-Mobile, iXi Mobile (consumer backends for US, Switzerland, Turkey, Uruguay), E-Plus, the third largest network operator in Germany with 13.6 million customers, as well as a major Chinese bank. Also, AxisMobile secured contract wins with a leading Ukrainian mobile network operator, a further leading tier one Russian mobile network operator and a leading Swiss mobile network operator. In the financial year ended December 2007, AxisMobile reported sales revenues of US $1.43m and a loss after tax of US $7.66m 

Commenting on the transaction, Synchronica's CEO, Carsten Brinkschulte said: "The fundraising and the acquisition of AxisMobile is a dramatic acceleration for Synchronica and I believe that it will build value for our shareholders. We aim to build a world-leader in the market of consumer mobile email and synchronisation solutions, and this acquisition is a key milestone which will improve our competitive positioning and accelerate our commercial growth. It will increase our ability to sell to customers, particularly to those in emerging economies, where we see the largest potential growth for mobile email and synchronisation. With the fundraising and the acquisition of AxisMobile, Synchronica now has sufficient mass and funding to take advantage of the outstanding opportunity to exploit the commercial potential of mass-market mobile email. The next few years will be an exciting time for us all here at Synchronica and for our customers around the globe. We look forward with increased confidence from this inflection point."

Shai Schiller, Executive Chairman of AxisMobile said: "We are delighted to join forces with Synchronica. We share the vision of mobile email and its huge potential in the consumer market. Synchronica is the ideal partner for AxisMobile, with complimentary technology and customer relations. They are our preferred partner to build mass at this exciting time for the industry."

At close of business on 12 August 2008, AxisMobile plc had a market capitalisation of £0.9m and total debt of £3.5m. The Acquisition requires all of the debt in AxisMobile plc to convert into equity, giving the Acquisition an enterprise value of £4.4m. As part of the Acquisition Synchronica will pay £156,000 in cash to AxisMobile plc, such payment to be used in discharging some of its liabilities.

Of the Placing Shares, 30,000,000 are expected to commence trading on AIM on or before Tuesday, 19 August 2008. The balance of the Placing Shares being 139,466,399 shares are conditional, inter alia, upon certain resolutions being approved at a general meeting of Synchronica to be held on Wednesday, 10 September 2008 at 10.00 a.m. (the "General Meeting"). A circular convening the General Meeting and giving more details on the Acquisition and the Placing will be sent to shareholders today and will be available to download from www.synchronica.com

Enquiries:

Synchronica plc	Carsten Brinkschulte, CEO,  Angus Dent, CFO,  Nicole Meissner, CMO	[phone] [phone] [phone] [phone] [phone]
FinnCap	Charles Cunningham, NOMAD and Broker	[phone]
Corfin Communications	William Cullum, Harry Chathli Alexis Gore	[phone]

Market Opportunity

The market for mobile email is expected to grow significantly over the next few years. Synchronica expects mobile email to grow most rapidly in the emerging markets due to a lack of physical telecoms infrastructure, low PC penetration and the now relatively low cost of a basic mobile phone. Informa predicts that there will be 4.81 billion mobile phone subscribers by 2012, with a vast majority of the next billion subscribers coming from emerging market regions ('Middle East and Africa Mobile Opportunities and Forecasts', Informa 2007). At the end of April 2008, China had approximately 580 million mobile phone users (China Daily, 25 May 2008). According to industry analysts, Frost & Sullivan, the mobile enterprise market in the Asia Pacific region (excluding Japan) is forecast to grow in value from just under $21 billion in 2006 to nearly $36 billion by 2011 ('Asia Pacific Mobile Communications Outlook', Frost & Sullivan, 2007).

Investor Webinar

Synchronica will be hosting an Investor Webinar on 27 August 2008 at 11.00 a.m. BST where Shareholders can interact on a live basis with the Company's executive directors, Carsten Brinkschulte (CEO) and Angus Dent (CFO), via the Internet, or by calling an access number. The login details and access numbers can be obtained by visiting http://www.synchronica.com/syncml-home/syncml-investor-relations.html and clicking on the 'Web Conference' link.

About Synchronica

Synchronica plc develops and markets industry standard mobile email and synchronization solutions for the vast majority of devices in the market today. Mobile operators, device manufacturers and service providers in emerging and developed markets use Synchronica products to offer mobile email, PIM synchronization and backup & restore services to their consumer and corporate customer base. Products include the push email and synchronization solution Mobile Gateway and the mass-market device backup solution Mobile Backup.

Headquartered in the UK with a development centre in Germany and a presence in Hong Kong, Dubai and U.S. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.LN). More information is available at www.synchronica.com.

 

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