LONDON (Alliance News) - Castleton Technology PLC saw its shares rise early Thursday after it raised GBP5.5 million in an oversubscribed placing, money it will use to help pay for the GBP4 million acquisition of Documotive Ltd, part of its strategy to expand its public sector technology support business.
In a statement, the company said it had raised the gross proceeds by placing 500 million shares of 0.1 pence each, some of which went to "several" new institutional investors. It will use the money for the Documotive acquisition, repaying a potion of its loan notes and for working capital to fund further acquisitions.
It will pay GBP3 million in cash and GBP1 million in zero coupon convertible loan notes for Documotive, a software supplier to the social housing sector.
Documotive is expected to report revenue of GBP3.2 million in the year to October 31, and earnings before interest, tax, depreciation and amortisation of GBP0.8 million.
Castleton said the newly acquired business complements the capabilities and offering of Montal, the specialist outsourced IT managed services business it acquired in June. However, limited customer overlap means it has cross-selling opportunities.
"The acquisition of Documotive is an important further step in our strategy to build out a public sector focused managed services and software business," Castleton Chief Executive Ian Smith said in a statement.
"We see a great opportunity to provide technology support to the fragmented and under invested public sector and we are actively pursuing further complementary investment opportunities," he added.
Separately, MXC Capital PLC said it had committed GBP1.2 million to Castleton's GBP5.5 million placing and will receive warrants over 5% of Castleton's enlarged share capital at the placing price. MXC Capital Advisory acted as sole financial adviser to Castleton in connection with the transaction.
"We see an exciting opportunity for growth in this sector and have been encouraged by the strong institutional demand for the placing, which was oversubscribed. We look forward to working closely with the Castleton board as they seek further investment opportunities to grow their business," MXC Chief Executive Marc Young said in a statement.
MXC Capital said it had also made its second investment, by providing up to GBP1 million of funding to mobile working platform developer 365 Agile Ltd, a company built by the team that built up Documotive.
MXC said the 365 Agile investment will be structured as a blend of equity and debt and will result in it owning a 25% stake in 365 Agile.
"We are pleased to be backing the management team in 365 Agile in building an exciting software enabled mobile working solutions business," Young said.
Castleton shares were up 11.9% at 1.45 pence early Thursday, one of the best-performing stocks on the AIM All-Share index. MXC Capital shares were up 5.9% at 1.80 pence.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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