mCloud Technologies Corp (CVE:MCLD) (OTCQB:MCLDF), through a subsidiary, has agreed to a A$12 million (C$11.3 million, US$8.3 million) cash and stock deal to acquire Australia-based visualization and analytics software company kanepi Group Pty Ltd.
The acquisition is expected to bolster mCloud’s presence in a variety of process industries, such as upstream and midstream oil and gas, offshore floating production storage and offloading, liquefied natural gas and mining facilities.
kanepi operates a development center in Singapore, and its footprint in the southern hemisphere will supplement mCloud’s existing customer base and enhance its AssetCare cloud platform, the company said.
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kanepi offers visual analytics solutions designed to deliver an immediate impact on the operations of asset-intensive industries. The firm’s core technologies are expected to be integrated into AssetCare, including its Connected Worker solution on RealWear headset. Working prototypes have been well received in North America, the company said.
"The acquisition of kanepi will bring mCloud a strategic book of business including major customers in new geographies," mCloud CEO Russ McMeekin said in a statement. "These customers will immediately contribute to our AssetCare customer base for Connected Solutions, and kanepi’s technology will accelerate our technology roadmap."
mCloud said it expects the acquisition to add C$2.4 million in annual recurring AssetCare revenue.
"Joining mCloud is a winning formula all around," kanepi founder and managing director Tim Haywood said. "This combination will accelerate our growth, expand the reach of our technology, and bring new value to our customers."
The A$12 million deal consists of A$5 million in cash and stock worth A$7 million. The number of shares will be determined by mCloud’s volume-weighted average trading price for the 15 trading days following the transaction’s closing.
The deal contains a clause that stipulates subject to kanepi earning A$10 million of revenue during the 12-month period following closing or A$14 million of revenue during the 24-month period following closing, or kanepi meeting certain customer acquisition targets during such periods, mCloud will potentially pay two additional payments to kanepi of A$1 million each.
If earned, fifty percent of each earn-out payment will be made in cash, with the remainder satisfied by issuing mCloud shares based on a price per share equal to the volume weighted average trading price of the shares on the TSX Venture Exchange for the 15 trading days immediately prior to the date on which the applicable earn-out condition is satisfied.
An infusion of cash
mCloud also announced that it has filed a preliminary prospectus supplement related to a proposed public offering of units worth C$10 million, which it plans to use in part to fund the acquisition.
Each unit will consist of one common share and one-half of a purchase warrant, the company said. The offering will be priced in the context of the market, with the offering price of the units and the term and exercise price of the warrants to be determined at the time of entering into an underwriting agreement for the offering.
The underwriters, led by Raymond James Ltd, will have the option to purchase up to an additional 15% of units for 30 days after the offering closes.
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