A few months can be a long time in the world of capital markets as witnessed unfortunately by data centre provider DC Two (ASX: DC2) which has had a $3 million pay day terminated following a series of setbacks, including the loss of key clients.
The sale of DC Two’s Modular Assets business was announced in February 2023 as part of a capital management strategy to divest non-core assets. DC Two promptly secured a buyer in DComm which completed its due diligence process on June 2023, passing with flying colours.
In the three months since, however, the deal faced numerous roadblocks in the form of pending conditions precedent. Namely, a range of Modular Assets clients have not agreed to their contracts being transferred to the new owners, or are ceasing the services of Modular Assets altogether.
This client exodus undermined the value of the assets and the feasibility of the deal for DComm where conditions set out in the purchase agreement could no longer be met.
In a bid to keep the agreement alive, DC Two extended exclusivity rights to DComm. Despite these efforts, the remaining conditions precedent remained unresolved, prompting the parties to to terminate the sale agreement.
DC Two and DComm, have now agreed to explore alternative solutions and potential new sale agreements that align with their strategies. The assets in question, although non-core for DC Two, are still a vital part of DComm’s portfolio strategy.
In light of the termination, DC Two is open to other interested parties who might wish to acquire these assets. Given their revenue contribution, the Company has decided to retain these assets for the time being. Moving forward, DC Two is focused on identifying projects that promise a high internal rate of return (IRR) to drive its business strategy.
DC Two has positioned itself as a vertically integrated revenue-generating data centre, cloud, and software business. Its key competitive advantages have been its innovative approach to modular data centre solutions and its commitment to providing cost-effective and efficient services.
DC Two’s data centre solutions offer scalability and quick deployment, making them attractive for businesses seeking rapid expansion without the burdensome capital costs and long lead times associated with traditional data centre builds.
The termination of the sale agreement may be a setback, but DC Two remains steadfast in its commitment to providing top-tier data centre, cloud, and software services.
For FY23, DC Two reported $2.7 million revenue which represented a 48% increase from the previous year. Pending shareholder approval, the company will shortly be changing its name to Adisyn Ltd (ASX: AI1).
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