PAYNOVA STREAMLINES AND ADAPTS BUSINESS TO THE MARKET WITH NEW INDUSTRIAL CO-OWNER
(NGM: PAY)
Paynova has signed a far-reaching management and structural agreement with India and USA-based Xponse IT Services Ltd (“Xponse”). The partnership partly entails streamlining and adapting Paynova’s business within the areas of development, operation and support. The aim of the collaboration is to satisfy the company’s need for a more cost-effective, market-oriented operation as quickly as possible, and to give the company a direct injection of financial and operational resources. The collaboration with Xponse will significantly increase Paynova’s cash flow and ensure improved conditions for more rapidly harnessing the potential volume established through agreements in the USA and Europe. The agreement with Xponse is conditional upon decisions taken at an extraordinary general meeting. The agreed services and contributions will be paid for through new shares, which means that Paynova will have a strong industrial co-owner.
Paynova has intensified its efforts in 2006, particularly on the American market, and has signed several valuable agreements giving the company potential for considerable volume increases.
Paynova’s development initiatives and adaptations regarding functionality, operation and support for these volumes have required higher investments and more resources than could have been foreseen. In addition, the initiatives have taken longer than previously calculated, which have jointly had an adverse impact on Paynova’s profitability and financial position.
Despite these delays, the volume development potential within the framework of signed agreements and collaborations remains very high. Volume-based additional payments also create strong incentives for high increases in the transaction volumes.
The collaboration with Xponse aims to resolve and take an overall approach both to Paynova’s need for financial reinforcement and cost-efficiency, as well as to an adaptation and strengthening of its operational resources.
COLLABORATION WITH XPONSE IT SERVICES (P) LTD.
The agreement with Xponse now enables Paynova to realise the potential volume that has been built up over the past year through new resources. Thanks to direct cash injections, the collaboration will also bolster the company’s cash flow and minimise the company’s costs over time. Moreover, Xponse is a strong industrial co-owner for Paynova with extensive experience of development, operation and support in IT and Internet-based operations, as well as e-commerce.
“Paynova is currently in a phase where we have excellent opportunities to achieve a considerable increase in transaction volumes. However, the development and adaptation process to meet these volumes has come up against some troublesome delays. The main reason has been insufficient resources – both operational and financial. The agreement with Xponse is therefore a perfect solution for Paynova. Xponse’s business concept and operation are focused on business development, and on streamlining IT operations and software production, which match Paynova’s current needs exactly. Alongside Xponse we will have brand new opportunities to increase the installation rate of new transaction volumes. I also welcome Xponse as a strong co-owner of Paynova, and look forward to a highly productive partnership,” says Lars Ekstedt, CEO of Paynova.
“Paynova fits in well with our international strategy, and it will be very exciting to be involved as a co-owner in the development and structuring of the company with the aim of increased expansion and profitability. We also see great potential for us and Paynova in the framework of our international networks, particularly in e-commerce in North America,” says Sanjay Kedia, CEO and founder of Xponse.
With over 300 employees and offices in Kolkata, India, and California, Xponse is a leading service provider for IT services, focusing on business development, software development and operation. Xponse has extensive experience of outsourcing-solutions, and is also well-established in IT solutions for the banking and finance sector. For further information about Xponse, go to www.xponse.com.
AGREEMENT TERMS AND FINANCING
Paynova intends to gather the company’s operational business in marketing, sales, development, operation and support into a wholly-owned Swedish subsidiary. This primarily entails that all income flows, physical and intangible assets and similar will remain in the listed parent company, as will limited general management resources. The operational business will be controlled by a steering group made up of representatives from both parties.
In accordance with the agreement, Xponse will supply the new subsidiary company with services in the following areas: Operational Management Services, Strategic Advice, Execution of the Restructuring Plan, Software Support and Development, Marketing Management Services and other Management Services. The contracted value amounts to MSEK 74.85.
In addition, Xponse will provide Paynova with a capital injection of MSEK 1 per month, along with access to a credit facility of MSEK 15, at a joint contracted value of MSEK 15.
The total value of the contracted services listed above amounts to MSEK 89.85.
A positive cash flow during January – June 2007 will also result in a performance premium at a contracted value of MSEK 12.
As reimbursement for these services, Paynova will pay a purchase sum in the form of new shares in Paynova equivalent to the value of the above-mentioned services. Payment will be made on five issue dates in a 12-month period (two in 2006 and three in 2007) and in line with the operation developing in accordance with the agreement and provision of services.
The issues shall take place at an issue rate equivalent to the share price for the 10 days prior to signature of the agreement (SEK 11.80). This means that a maximum of approximately 8,650,000 shares may be issued. Xponse’s ownership share in Paynova after the transaction has been carried out is estimated at a maximum of around 23 per cent if the additional remuneration mentioned above is paid.
The Board’s decision regarding the agreement is conditional on the extraordinary general meeting’s approval of the agreement and authorisation for the Board to decide on offset share issues directed at Xponse.
An extraordinary meeting of shareholders will be held in the week beginning Monday 11 September and a notice to attend will be published within a week.
A number of major shareholders, jointly representing over 50 per cent of votes in the company, have declared their support for the Board’s proposal.
FINANCIAL AND OTHER EFFECTS
The Board judges that the agreement with Xponse will have decisive effects from as early as September. The most significant effects of the agreement are the direct impact on cash flows and the improved conditions for rapidly installing transaction volumes in a way that is more cost-effective and market-oriented than previously possible.
The parties’ objective is to achieve a positive cash flow during the first half of 2007.
FOR FURTHER INFORMATION CONTACT:
Lars Ekstedt, CEO
Phone: +46 (0)703-74 27 37
Lars Guldstrand, Chairman of the Board
Phone: +46 (0)70-528 81 81
ABOUT XPONSE
See www.xponse.com
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