Cyber encryption specialist Cryptosoft, the flagship investment of technology-focused investment company Tern PLC (LON:TERN), has acquired Device Authority, a device authentication software specialist.
Cryptosoft will be paying for the acquisition through the issue of new “A” ordinary shares of Cryptosoft.
An existing shareholder of Device Authority, Alsop Louie Partners, a San Francisco based venture capitalist specialising in security software, is investing US$500,000 alongside a £1 million investment by Tern to fund business development, valuing the combined entity at £13.6 million.
The new investment will be in "A" preference shares issued at par in Cryptosoft, which are convertible into "A" ordinary shares.
Tern's stake in Cryptosoft, assuming full conversion of the “A” preference shares, will be 52.4%, valuing its stake at prior to the cash injection at £6.1mln, versus a valuation of £961,439 at the end of 2015. Tern's current market capitalisation is around £7.8mln.
Tern said Device Authority's technology is protected by patents, and is ideal for the Internet of Things (IoT) and machine-to-machine (M2M) applications, and therefore complementary to Cryptosoft's technology.
The two companies already work together via a strategic partnership and have jointly developed products, and merging the operations should expand cross-selling opportunities and provide numerous synergies.
Following the acquisition, Cryptosoft will be renamed Device Authority Limited and the board will be chaired by Tern director, Al Sisto, while the chief executive officer will be Darron Antill of Cryptosoft and the chief technical officer will be Talbot Harty of Device Authority Inc.
Shares in Tern PLC were down by just over a penny to 10.57p in early trading.