IT services company Atturra (ASX: ATA) has locked in an acquisition agreement for rival Cirrus Networks (ASX: CRN) for a total consideration of $37 million in cash plus additional shares. This transaction is poised to have a significant impact on the Australian IT services landscape, consolidating the position of Atturra as a leading player in the sector.
Cirrus, with a market cap of $38.1 million, specialises in highly recurring Managed Services, which aligns with a key growth area for Atturra. This strategic move complements Atturra’s recent acquisition bid for tech company Somerville for $15 million plus shares, and reinforces its position in mid-market advisory services.
The total consideration for this acquisition values Cirrus at approximately $49.3 million. This valuation translates to an FY23 Adjusted EBITDA of 8.8x before synergies and 7.0x when accounting for anticipated synergies. The deal is anticipated to have a positive impact on Atturra’s earnings per share (EPS) in FY24.
CEO of Atturra, Stephen Kowal, said, “The acquisition of Cirrus has strong strategic and cultural alignment with Atturra’s industry and service capabilities and is a positive step towards Atturra’s vision to be Australia’s leading advisory and IT solutions provider.
“Cirrus will significantly expand Atturra’s recurring managed service capabilities and will provide an enlarged and complementary client base with significant future cross-sell opportunities.”
According to Kowal, Cirrus’s expertise in the government and energy & resources industries will enhance Atturra’s ability to become a market leader in these sectors.
The financial structure of the deal is defined by the Scheme Consideration. As per the consideration, the maximum cash consideration payable by Atturra should not exceed $37.5 million. And the share consideration is capped at 13.98 million Atturra shares, valued at approximately $12.32 million. The agreed value for Atturra shares, used to calculate the number of shares issued under the SID, is $0.8815 per share, based on Atturra’s 30-day VWAP (volume weighted average price) until September 8, 2023.
Cirrus shareholders are set to receive a Scheme Consideration of $0.053 per share, with various options to take advantage of this consideration. They can opt for a combination of cash and shares, or they can go for an all-cash or all-share consideration, subject to certain conditions. The offer represents a premium to Cirrus’ recent stock performance.
Founded in 2012, Cirrus is an ASX-listed IT solutions provider with a strong presence in the ACT, WA, and VIC regions of Australia. A significant portion, i.e. 45%, of Cirrus’ revenue comes from government contracts, and it serves a major client roster, including AUSTRAC, CommBank, Rio Tinto, IDP, among others.
Managing Director of Cirrus, Chris McLaughlin, said, “The Board of Cirrus believe this transaction represents a compelling opportunity for Cirrus shareholders to realise immediate value and further upside potential via Atturra shares. Working with Atturra will provide excellent career opportunities for our team and we look forward to partnering with the organisation going forward.”
Once the transaction is complete, Atturra will restructure its financial arrangements, including refinancing existing facilities and establishing a new $30.0 million senior debt facility with Westpac Banking Corporation.
In the coming months, this transaction will be put to a vote and it is expected to be finalised by December this year. Cirrus has encouraged shareholders to vote in favour, in light of no competing offers.
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