PAYNOVA REINFORCES ITS MARKET POSITION AND RESOURCES IN NORTH AMERICA THROUGH STRATEGIC ACQUISITION
Paynova has concluded an agreement concerning the acquisition of the American company Global Product Management (“GPM”). Starting in June 2006, Paynova is guaranteed a transaction volume of just over MSEK 20 per month with strong incentives for further significant volume increases. The agreement also aims for considerable reinforcement of resources in risk management, quality assurance, web integration, technology and support in order to increase capacity and the rate of both installation work and operation and support for the American transaction volumes.
At the end of 2005 and the beginning of 2006, Paynova established partnerships, resources and transaction volumes in the USA. The work of securing and expanding activities has continued to be intensive during the first quarter. The installation of new volumes through existing cooperation in the USA has proved to be more comprehensive than previously assumed, which involved a certain delay in the installations. Among other things, the delay is due to significantly higher requirements for quality assurance and risk management, as well as customer support and technical support.
The acquisition of GPM gives Paynova the opportunity to speed up the installation of transaction volumes in the USA, from both new and existing agreements, and is therefore a very important step for the company.
The company is guaranteed established transaction volumes
The agreement predicts significant volume increases during the second half of 2006, starting as soon as June and then increasing volumes until they exceed MSEK 110 per month. Of these volumes just over MSEK 20 (USD 3 million) per month is guaranteed during one twelve-month period. These volumes are currently to be found within the seller’s own online retail business. For monthly volumes in excess of USD 3 million during the measurement period June-November 2006, a variable volume-based additional remuneration is applied, in the form of subscription options as set out below.
New resources reinforce Paynova’s installation and operational capacity
The acquisition of GPM means that Paynova gains access to significantly increased resources on the US market. Paynova can thereby make use of a number of technical platforms, in such areas as logistics, order management, and system integration for online shopping. In addition, Paynova will gain access to both technical installations and a comprehensive pool of resources, including 90 or so system developers, who create a comprehensive capacity for risk management and quality assurance. These resources all together will to a great degree strengthen what Paynova can offer and significantly expand its capacity for efficient installation and support of both existing and new online merchants.
“Through the acquisition of GPM, Paynova will gain a guaranteed injection of new transaction volumes as early as June this year, but at least equally important are the resources that GPM and its founder Steven Mahana will bring Paynova. With his long experience in online trading and payment services on the North American market, Steven Mahana is a very strong industrial partner for Paynova. His existing online trading business will generate transaction volumes faster, while the deal gives us the resources we need to be able to install both these volumes and other volumes from previously reported partnerships in the region at a faster rate,” says Lars Ekstedt, Paynova CEO.
Agreement conditions and financing
A framework agreement has been concluded with a basic purchase sum of USD 1,065 million (approx. MSEK 8), to be paid in the form of new shares in Paynova AB plus an additional purchase sum through new subscription options based on actual development of transaction volumes. The Board’s decision concerning the agreement is conditional on the Annual General Meeting on 11 May 2006 deciding to accept the proposal concerning authority for strategic acquisitions.
Calculated on the basis of yesterday’s share price (SEK 13.10), the basic purchase sum consists of approximately 600,000 new shares in Paynova. The final number of shares will be based on the share price when the deal is made following the Annual General Meeting.
The additional purchase sum is based on added transaction volume in accordance with a step model, with the maximum remuneration, 400,000 subscription options, falling due when the generated monthly transaction volume exceeds SEK 110 million (USD 15 million). At lower volumes, a reduced number fall due, down to 75,000 subscription options for a volume of between approximately MSEK 20 and MSEK 45 (USD 3 and 6 million). The measurement period for reconciliation of transaction volumes is June-November 2006.
A subscription option provides the right to subscribe to a share at a rate amounting to 120 per cent of the rate for the new shares. The shares can be subscribed to between 1 May 2007 and 31 January 2008 and market terms otherwise apply.
Half of the shares issued and all subscription options are conditional on fulfilment of the agreement. They are placed in “escrow” to await reconciliation of transaction volumes and conditions during the second half of 2006.
Based on yesterday’s share price (SEK 13.10), a maximum yield in transaction volume gives around 3 per cent dilution of the ownership for existing shareholders, of which around 2 per cent comprise new shares and just over 1 per cent subscription options.
The Board judges that through this agreement and the cooperation, Paynova can generate considerable growth in transaction volumes, income and profits during 2006 against a limited cost for the company, particularly considering how the agreements interplay and reinforce previously concluded agreements and cooperation in North America.
For further information, please contact:
Lars Ekstedt, CEO
Telephone: + 46 (0)703-74 27 37
About Paynova
Paynova offers an international, account-based payment service via the Internet. With Paynova as the only counterpart, e-retailers get a payment guarantee for around twenty payment options in 10 languages with 8 currencies in a security-certified interface (PCI). Consumers can open an account, a Paynova wallet, for free on the Internet to make purchases more secure and simpler, as well as look after transfers between family members, friends and acquaintances.
Paynova has agreements with around 1,000 e-retailers. Most are found in the following prioritised segments: travel, retailing and media/network games. The company has been listed on NGM Equity since February 2004. For more information: www.paynova.com