Plexure Group chairman Phil Norman is hailing the company's planned A$120 million ($125m) merger with Australian transaction platform Task as "very fair value" and says it will offer diversification and expansion opportunities.
Subject to shareholder approval, Plexure intends to acquire Task with a A$30m cash payment, A$78.5m in new Plexure shares issued to the vendors at 60c each and A$11.5m new shares issued to selected Task employees under a long term incentive scheme.
The transaction is also subject to Plexure undertaking a capital raising of up to A$20m prior to completion.
Task chief executive Daniel Houden will become Plexure's new CEO if the deal goes through - replacing Craig Herbison, who abruptly resigned on August 3.
Houden and his brother Dean took over the Task business from their parents, who founded the company in 2000 in a garage in Sydney.
If the transaction goes through, Task shareholders will have a 42.9 per cent stake in Plexure.
Task's cloud-based platform is centred on the hospitality industry and includes point of sale, self service kiosk solutions, online ordering, mobile apps and kitchen management solutions.
An investor presentation shows Task had pro-forma revenue of $14.0m and a pro-forma ebitda of $2.4m for the year ended June 30, 2021. The majority of its revenue is recurring and a growing proportion of this revenue is derived from clients in North America.
Customers include Starbucks, Rubios, Bakers Delight, Crown Casinos and SkyCity.
In May, Plexure revealed it had swung to a $7.9m loss in the 12 months to March 31, 2021, amid challenging Covid-induced conditions.
The company did not provide earnings guidance for the year ahead at the time of its May report.
But in its investor presentation outlining the merger, it said combined group revenue would be between $45m and $47m for FY2022, assuming the deal closed on October 1.
Norman said on a conference call that Plexure was introduced to Task three or four months ago by an adviser.
"Our internal value analysis indicates [the merger price] represents a very fair value for the business," he said, noting the recent NYSE (New York Stock Exchange) listing of online ordering software business Olo.
That company processes about three times the number of transactions as Task in the United States and recently listed at a valuation of US$3.6 billion ($5.1b).
Norman said the Task deal would provide cross-selling benefits, cost synergies and help to diversify Plexure's revenue base.
"It's very much part of our growth strategy given the complimentary product offerings of both brands."
Plexure earns the majority of its annual revenue from McDonald's, which is also a 9.41 per cent shareholder.
Plexure's revenue dependency on McDonald's will reduce significantly through the addition of Task's 50 blue-chip clients and the recurring revenue they bring, Norman said.
McDonald's had indicated its support for the transaction, he said.
"I've spoken with their senior leadership team and they think it's a good transaction for this business and a good one for them."
McDonald's has a top-up right in respect of share issues in order to maintain up to a 9.9 per cent holding. The fast-food giant has indicated it would defer any potential exercise of those rights for a period of time, Norman said.
"But they have said they will participate in the $20m capital raise we are proposing."
Plexure has struggled to hire and retain qualified staff to support its growth ambitions throughout the year. Its staff headcount ended the year at 150 - compared with 163 at the end of its half-year, and well below its target of 190 staff.
Task's Dan Houden said his company had 50 employees, 10 of whom specialised in software development.
Plexure shares recently traded at 60c, up 6c (11 per cent) on the news.
After sagging to a 42c low at the start of the Covid pandemic, the stock catapulted to a high of $1.58 last October before a steady decline since the start of this year.