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Acquisition of IronTree Internet Services
Metrofile Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MFL
ISIN: ZAE000061727
("Metrofile" or the “Company”)
ACQUISITION OF IRONTREE INTERNET SERVICES
1. Introduction
The Company is pleased to announce that, through its wholly-
owned subsidiary Metrofile Pty Ltd, it has agreed to acquire 70%
of the shares in and claims against IronTree Internet Services
CC (“IronTree”) from the founding shareholders consisting of a
consortium of individual investors (collectively the “Sellers”)
with the remaining 30% to be purchased in 2024. The total
consideration for 100% of shares in and claims against IronTree
will be for a minimum consideration of R80 000 000 and a maximum
consideration of R140 000 000 (the “Acquisition”).
The effective date of the Acquisition is expected to be on or
about 15 November 2021, or a later date as agreed between the
parties (“Effective Date”).
2. Nature of IronTree Business
IronTree provides data management services including cloud
backup, disaster recovery and specialised server hosting in a
private cloud. IronTree also offers cyber-crime and ransomware
prevention, ongoing privacy law compliance management, and
business continuity planning services.
3. Rationale for the Acquisition
This Acquisition complements Metrofile’s strategic pillar of
accelerating its position into the provision of information
management and digital services. This Acquisition will benefit
Metrofile’s clients who are increasingly managing their
information digitally and will provide them with digital back up
and hosting services that support their businesses.
IronTree will strengthen Metrofile’s core capabilities in
virtual storage and digital risk management. IronTree will also
provide access to products in high growth segments such as
cybersecurity and digital compliance.
4. Terms of the Acquisition
The Acquisition will be settled on the following basis:
- an upfront cash amount of R48 918 295 for 70% of the shares
in and claims against IronTree will be payable to the Sellers
on the Effective Date (“Upfront Payment”);
- a top-up payment (of maximum R12 281 705) will be payable
should IronTree achieve an adjusted EBITDA of R18 719 464 for
the 12-month period ending 28 February 2022 (“Top-up
Payment”);
- the remaining 30% of the shares will be purchased in 2024 and
will be determined using a sliding scale based on the growth
in revenue of the business up to the 12-month period ending
29 February 2024 (“Second Payment”). The Second Payment will
be based on revenue, rather than EBITDA, in order to simplify
the integration of IronTree into Metrofile as integration
initiatives are likely to consolidate costs of both Metrofile
and IronTree;
- The Upfront, Top-up and Second Payment will cumulatively not
be less than R80 000 000 and will not exceed a total purchase
consideration of R140 000 000. The maximum payment will be
linked to a Revenue target of R100 000 000 for the 12-month
period ending 29 February 2024.
The Sellers have agreed a restraint of trade for a period of 5
years from the effective date of the Second Payment.
Warranties provided are normal for a transaction of this nature.
The Company confirms that the IronTree memorandum of
incorporation will comply with clause 10.21 of schedule 10 of
the JSE Listings Requirements.
5. Conditions Precedent
The implementation of the Acquisition will be subject to the
fulfilment of the remaining conditions precedent noted below by
no later than 12 January 2022, however we expect these to be
fulfilled by the Effective Date:
- consent is received from parties to material contracts as
identified by Metrofile as well as from Metrofile’s senior
lender;
- employment contracts are entered into with key management;
- completion of Metrofile’s due diligence investigation; and
- IronTree is converted into a private limited liability company
in accordance with the terms of the Companies Act, 71 of 2008.
6. Financial Information of IronTree
As per IronTree's latest management accounts for the year ended
28 February 2021 (in accordance with IFRS), the following
information is extracted:
- Revenue of R45 288 871;
- Profit after tax of R6 676 523;
- Adjusted profit after tax of R9 501 803;
- Net assets of R4 280 188.
7. Categorisation
The Acquisition is a category 2 transaction for the Company and
shareholder approval is therefore not required. Shareholders
will be informed once the conditions precedent detailed above
have been fulfilled.
8. Responsibility Statement
The Board accepts responsibility for the information contained
in this announcement. To the best of its knowledge and belief,
the information contained in this announcement is true and
nothing has been omitted which is likely to affect the importance
of the information included.
Illovo
21 October 2021
Sponsor
The Standard Bank of South Africa Limited
Transaction Advisor
Apex Partners
Date: 21-10-2021 11:25:00
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