LONDON (Alliance News) - Eco City Vehicles PLC Friday said it has agreed to Tax Computer Systems Ltd, a company which supplies corporation tax software to large businesses, and said it will pay for the deal using proceeds from a large placing and from new debt facilities.
Eco City plans to use existing cash plus GBP30.0 million worth of new debt and GBP45.0 million in proceeds from a placing to fund the acquisition, and then plans to re-admit to AIM with a new name, Tax Systems PLC.
Eco City said it has agreed to acquire Tax Computer Systems for a total of GBP73.0 million, allowing it to buy a leading supplier within the sector that has a blue chip customer base comprised of 43 of the FTSE 100 firms and 19 of the top 20 UK accountancy firms, it said.
Tax Computer Systems generated GBP12.8 million in revenue in 2015, 90% of which was recurring, and a earnings before interest, tax, deprecation and amortisation margin of 52%.
Eco City believes there is now an opportunity to invest further in the platform and team, accelerate organic growth and seek complementary acquisitions at Tax Computer Systems.
The consideration will be settled using a combination of funds, including existing cash resources, new debt facilities and the proceeds from a conditional placing that was unveiled Friday. The acquisition is also conditional on the placing and the debt facilities.
Eco City has secured loan facilities from HSBC Bank PLC to obtain a GBP9.0 million loan and a revolving credit facility of GBP11.0 million. Eco City has also issued GBP10.0 million worth of unsecured loan notes.
The placing will raise GBP45.0 million, but that will fall to GBP41.0 million after costs. The placing will be large, representing around 88% of the enlarged issued share capital of the business.
Notably, the placing is not underwritten and the details have not been revealed, but Eco City did state it would also consolidate every 50 shares into one new share.
However, fellow London-listed MXC Capital Ltd will subscribe to GBP8.7 million worth of new shares under that placing and will hold a 20% share of the enlarged issued share capital of Tax Computer Systems.
A partner in MXC Capital, Gavin Lyons, will also become executive chairman of the new enlarged company.
Eco City shares were down 3.7% to 2.77 pence per share on Friday morning whilst MXC Capital shares were down 1.0% to 3.07 pence.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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