Cirralto Ltd (ASX:CRO) has signed a binding share sale agreement (SSA) to acquire 100% of the issued capital of Sydney-based fintech Invigo Pty Ltd with an expected completion date of July 12.
The acquisition is expected to unlock multiple commercial opportunities, drive revenue growth and provide opportunities for Cirralto to deploy its Spenda products across Invigo’s customer base.
This move follows several months of negotiations and builds upon the Partnering Agreement and Strategic Loan Funding Arrangement entered into with Invigo in August 2019 and April 2021, respectively.
Shares have been as much as 13% higher in early trading to 6.1 cents while the company's market cap pre-open was approximately $148.5 million.
“Exciting acquisition”
Speaking to the acquisition, CRO chief executive officer Adrian Floate said: “The acquisition of Invigo into the Cirralto product portfolio will enable immediately service our payments customer base with Invigo’s cashflow solutions.
“This is a really exciting acquisition and there is no question that blending customer payments with improved access to working capital is a big win for our customers and I expect that all shareholders will be delighted too.”
Invigo’s service
Invigo offers both buyer and seller initiated immediate payment of invoices raised by the seller or the buyer, pay-by-instalment or immediate supplier payment, for all business customers.
For the seller, this can be used as a tool to extend credit to customers and drive cash flow while for the buyer, it can be used to create liquidity in their business, smooth seasonal purchasing profiles and manage purchasing within credit limits.
Invigo generates revenue by charging customer fees as a percentage of the total transaction value and/or charging interest on customers borrowings.
Key terms of agreement
Under the terms of the SSA, Cirralto has agreed to acquire all of the issued shares in Invigo.
The consideration for the acquisition is 100% scrip based, with Cirralto agreeing to issue in aggregate 132,951,740 Cirralto shares (consideration share) to the shareholders of Invigo with each consideration share having:
- A deemed issue price of approximately 7.5 cents per consideration share; and
- A total value equal to approximately $10 million.
Either party may terminate the SSA if the Conditions are not satisfied, or validly waived by Cirralto (as applicable) by August 31.
The current $2 million loan agreement between the Company and Invigo will remain in place and will be consolidated into the company’s post-acquisition accounts.
Anticipated synergies
The acquisition enables Cirralto to deliver multi-option payment services on more favourable terms to both the buyer and the seller, releasing higher margins to any seller and increasing the buying capacity of buyers.
It will also allow the company to reduce administration costs through the consolidation of credit and risk management into a single team.
Acquiring Invigo adds additional functionality to the Spenda suite, enabling the company to offer a broad range of payment products that can be easily integrated into any business.
The move will enable Cirralto to further monetise its existing technologies, fully integrate a range of funding options into its core platform, deliver multi-option payment services on favourable terms to both the buyer and seller, create AML/KYC economies of scale and enable free-flowing BNPL and Pay by instalment strategy in the B2B customer category.
New appointments
With effect from completion, Andy Hilton will join Cirralto’s executive leadership team and Corrie Hassan will assume an executive managerial role within the company.
Hilton is co-founder and managing director of Invigo and has a background in both accounting and engineering and over five years managed the 20 times growth of an IT distribution business.
Having spent nearly 30 years in traditional lending businesses and having established two others previously, Hilton identified the need for companies to access finance more efficiently.
Hassan is co-founder and operational director of Invigo.
She has more than 20 years’ business finance experience in the UK and Australia, much of the time focused on risk and operational management.
She was founder and CEO for 10 years of 180 Group, an Australian SME lending business, immediately prior to joining Andy to establish Invigo.
Hassan now manages portfolio risk as well as maintaining control over Invigo’s operations.