Tungsten Corporation has announced its intention to seek admission to trading on the AIM market of the London Stock Exchange. Tungsten Corporation was founded by Edmund Truell and Danny Truell to identify and acquire a companies within the financial services sector.
Tungsten Corporation plc was founded by Edmund Truell and Danny Truell to identify and acquire a company, business or asset within the financial services sector which it can grow into a business with a significant market presence in a segment with potential for sustainable long-term cash generation, return on equity and growth.
Tungsten is pleased to announce i) the conditional acquisition of OB10, a leading global business-to-business (“B2B”) e-invoicing network, for £99 million; ii) that it has signed a 5 year rolling licence agreement with @UK PLC to deploy its analytic software technology to enable TungstenAnalytics to be delivered across Tungsten’s global e-invoicing network following the acquisition of OB10; iii) its agreement (subject to appropriate regulatory approvals) to acquire an identified duly authorised UK bank, whose assets solely comprise short term UK gilts and / or certificates of deposit (the “Bank”) to specialise in the provision of supply chain financing (the transactions under i) and iii) being the “Acquisitions”); and iv) its intention to seek admission to trading on the AIM market of the London Stock Exchange (“AIM”).
Tungsten is also proposing to raise gross proceeds of up to £160 million pursuant to a placing of new ordinary shares (the “Placing” and, together with the Acquisitions, the “Transaction”).
Completion of each of the acquisition of OB10, the Placing and Admission are all inter-conditional upon one another, such that none of these component parts can complete without the remaining parts also completing. It is expected that completion of the Placing and the acquisition of OB10 will occur automatically upon Admission. Completion of the acquisition of the Bank is not, inter alia, conditional on Admission nor completion of the acquisition of OB10.
Completion of the Transaction will give more resources to OB10 to develop and deliver value added services, including spend analytic solutions, to the predominantly investment grade universe of buying organisations that are already clients of OB10’s leading global e-invoicing network. A key part of the strategy will be to deploy Tungsten’s financial services expertise to create an invoice financing capability through the Bank and so give OB10’s customer base of suppliers the ability to accelerate payment of their receivables in a straightforward and cost-effective manner.
Commenting on the Transaction, Edmund Truell, Group CEO of Tungsten, said:
“We have an exciting opportunity to create a disruptive global player, by enhancing the offering of OB10’s leading global e-invoicing network which already serves a number of the world’s largest corporates and governments. In addition, we believe that TungstenAnalytics can provide considerable savings for buyers on the platform from which we would expect to benefit. The strategy for the Group to include a clean, duly authorised, UK bank into the middle of the flow of billions across the global network should provide suppliers with access to accelerated invoice settlement on a transparent and simple to execute basis. Tungsten thus aims to transform the financial aspects of the global supply chain.”
Luke McKeever, Chief Executive Officer of OB10, said:
“OB10 is a fast growing, private business that, since its inception in 2000, has developed into a leading and global player in electronic invoicing. The OB10 Board is committed to realising the long-term potential of the business by building the number one global trading network for its customers; the combination of OB10 with the enlarged Tungsten Corporation will help to fulfil that vision.
OB10’s current services to its customers will be enhanced as part of Tungsten with the planned introduction of powerful payment and analytical solutions and the accelerated development of value added services. It is envisaged that the recently launched Express Payments service will be enhanced by access to banking capital. Further, the broader resources available from Tungsten will enable OB10 to continue its investment in innovative solution developments, enhanced service delivery and international expansion for our customers.”
• The strategic vision of Tungsten is to create a leading cloud based global trading network, monetising the existing OB10 e-invoicing platform with the addition of value added services such as seamless electronically secure encrypted invoice discounting against “approved for pay” invoices, substantially reducing fraud and dilutions risks so evident in traditional “old model” supply chain finance; and the provision of spend analytics technology across OB10’s established network.
• The activities of Tungsten and its subsidiaries are, following the completion of the Transaction, designed to benefit all parties in the global supply chain of its multi-national clients. OB10 already has over 140,000 suppliers to whom Tungsten will offer supply chain financing services in order to generate high margin revenues; and has a large line-level item global data set against which Tungsten will develop and deploy spend analytic solutions.
o OB10: a leading global e-invoicing network with a cloud based B2B network, processing over £100bn in invoice value through its network in the 12 months to April 2013 has:
• A long-established track record since being founded in 2000, with a number of Fortune 500 and FTSE 100 companies as clients , amongst the 122 buying organisations on the network including HP, Kraft, Unilever, GSK, J&J, BP and Tesco; and US and UK government departments such as the NHS shared business services; and
• A network of over 140,000 registered suppliers, active in 42 countries.
o Tungsten: a company founded by Edmund Truell and Danny Truell to identify and acquire a company, business or asset within the financial services sector which it can grow into a business with a significant market presence in a segment with potential for sustainable long-term cash generation, return on equity and growth benefits from:
• Directors with combined experience across the fin-tech and financial services sectors, a proven track record of delivering attractive investment returns and senior managerial and operational expertise;
• Planned supply chain financing capability for the OB10 network of customers, combining:
• a signed agreement to acquire, subject to Prudential Regulatory Authority (“PRA”) approval, a duly authorised UK bank that will have a “clean” balance sheet with assets comprising solely of short term UK gilts and / or certificates of deposit; and
• alternative financing routes available to complement these plans, which incorporate an indicative level of first loss capital of between 5% and 10%, such capital to be raised as part of the Placing.
o TungstenAnalytics: Tungsten has signed a 5 year rolling agreement with @UK PLC to deliver TungstenAnalytics, a comprehensive and innovative line level spend analytics solution, to be applied to the invoice data transacted over OB10’s network:
• The market opportunity for the spend analytics offering is significant: by applying illustrative cost saving economics for price variance and price benchmarking, a multi-billion pound cost saving opportunity across OB10’s buyer network is implied;
• The overall global market for spend analysis is expected to grow at 15% – 23% over the next two years, having experienced a 5 year CAGR of 18%; and
• The total maximum value payable to @UK PLC over the initial five year period is £3.4m.
• It is proposed that the Placing will raise up to £160 million. The proceeds will predominantly be used as follows:
o £73 million to finance the cash element of the OB10 consideration, payable to OB10’s Shareholders (of which £2 million will be used by certain option holders in OB10 to purchase shares in Tungsten pursuant to an undertaking, and which will be subject to a lock-up);
o £50 – 58 million to (a) finance the completion of the acquisition of the Bank for £30 million (which remains subject to PRA approval) and (b) provide solvency capital to Tungsten to support its invoice discounting activities;
o £15 million for working capital purposes including to embed the infrastructure and business support teams to roll out value added services (invoice financing and TungstenAnalytics’s spend analytics solutions) across the current OB10 customer network and with an objective of capturing more of their estimated £500 billion of annual invoiced spend; and
o £16 million in Transaction fees and expenses.
• Tungsten will be led by Edmund Truell as Group CEO, overseen by a highly regarded Non-Executive Board of Arnold Hoevenaars (Chairman), Peter Kiernan, Michael Spencer and Danny Truell; and supported by the executive management team of Luke McKeever, Philip Ashdown and Jeffrey Belkin.
• The Transaction will initially be effected by the acquisition of OB10 by Tungsten and Admission. Tungsten’s 5 year rolling licence for TungstenAnalytics agreed by Tungsten and @UK PLC (the “License”) will become live upon Admission and the payment of the agreed establishment fees and installation costs (together not expected to be greater than £0.5m). The acquisition of OB10 is conditional upon, inter alia, final Tungsten board approval and Admission becoming effective. The acquisition of the Bank is subject to PRA approval, and this process will not prevent the acquisition of OB10, the Placing or Admission becoming unconditional.
• The OB10 shareholders, including Fleming Family & Partners and funds managed by Azini Capital Partners, have committed to receive 30% of their proceeds of sale by way of new shares in Tungsten, which will be subject to a twelve month lock-up following the date of Admission and orderly marketing arrangements thereafter.
About the Transaction
It is proposed that Tungsten’s shares will be admitted to trading on AIM. It is expected that completion of each of the acquisition of OB10, the Placing and Admission will take place in October 2013.
Canaccord Genuity Limited is acting as Financial Adviser and Broker to Tungsten, and as Sole Bookrunner in relation to the Placing; Charles Stanley Securities is acting as NOMAD to Tungsten. Full details of the Offer will be included in the Admission Document, expected to be published in due course.
For more information:
Tungsten Corporation plc +44 (0) 7785 954 350
Edmund Truell, CEO
OB10 + 44 (0) 20 7406 5534
Luke McKeever, CEO
Equus Group (Communications) +44 (0) 20 7223 1100
Piers Hooper / Sam Barton