Following its non-binding term sheet in relation to its proposed acquisition of Roots Communications, iWOW Technology has entered into a sale and purchase agreement (SPA) with Funtec Resources Pte Ltd, Tio Ngi Hin @ Teo Lai Seng and Chan Kin Kok.
Roots Communications is a Singapore-based telecommunications services provider and regional value-added distributor.
The SPA is for the proposed acquisition of all 2.2 million shares held by Funtec Resources in Roots Communications. Roots Communications is wholly-owned by Funtec Resources, of which Teo and Chan are the controlling shareholders. Upon the completion of the proposed acquisition, Roots Communications will become a wholly-owned subsidiary of iWOW Technology.
According to iWOW, the consideration for the shares in Roots Communication will be calculated based on six times of Roots Communication’s audited annual average consolidated net profit after tax for the operating business from April 1, 2023, to March 31, 2026.
Roots Communications’ current shareholders have also provided a profit guarantee of up to $3.1 million, should the company to achieve a forward average net profit after tax of $1.35 million per year between April 1, 2023, to March 31, 2026.
According to iWOW Technology, Roots Communications recorded a historical average revenue of $27.0 million and net profit of $1.35 million for the last three financial years ended Dec 31, 2021, representing approximately 78% and 35% of iWOW Technology’s FY2022 revenue and net profit after tax respectively.
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The computation of the consideration excludes interest on borrowings and other finance costs, management fees and external and internal audit fees and expenses in excess of $35,000 for each FY during the period and capped at $18 million.
Of the $18 million, around 60%, or $10.8 million will be satisfied in cash. Up to $7.2 million, the remaining 40% balance, will be paid by the allotment and issuance of new shares in iWOW’s share capital.
Under the SPA, the first tranche of consideration shares amounting to around 12.96 million, will be allotted and issued by iWOW to Funtec Resources at an issue price of 25 cents per consideration share. The issue price represents a premium of approximately 4.17% to the volume weighted average price (VWAP) of 24 cents for trades done on the shares in iWOW on Dec 19, which is the full market day that the company’s shares were traded in before the SPA.
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According to iWOW, the proposed acquisition, upon its completion, is expected to enlarge its customer base and extend its regional presence as it gains access to Roots’ extensive network of blue-chip clientele. iWOW also intends to leverage on the company’s industry know-how to enhance its own product offerings.
“The acquisition of Roots is a key catalyst for our broader growth strategy. Roots' proven track record in serving mission-critical enterprises such as telcos, rail operators and hospitals is a clear testimony of not only their competence in wireless engineering but also their culture of quality in execution. The significant synergies in terms of technical capability and customer base will position us positively for national-level smart city and IoT opportunities; both locally and across the region,” says Raymond Bo, CEO and executive director of iWOW.
“Over the past 25 years, Roots has built up a strong name as a telecommunications enabler of choice for enterprises, transportation operators and mobile operators; delivering exceptional wireless engineering services and resilient network infrastructure solutions. We are extremely excited to enhance our product portfolio with iWOW’s innovative IoT solutions to further our customer’s digitalization journey,” says Roots CEO Chan.
Shares in iWOW closed flat at 24 cents on Dec 22.
