Frontier Digital Ventures Ltd (ASX:FDV) will take its ownership of Encuentra24 (E24) from 26.3% to 100% as it looks to consolidate its position in the LATAM region.
E24 is a leading general classifieds marketplace with a strong presence across key property and auto verticals and limited competition. It has presence in five key LATAM markets - Panama, Costa Rica, Guatemala, Nicaragua and El Salvador.
It has strong operating metrics including 9.6 million monthly sessions and 1.4 million leads in October 2021, providing significant monetisation opportunities. E24 also has annualised revenue for Q3 2021 of A$8.8 million with Q3 2021 EBITDA of approximately A$0.2 million (100% basis).
Frontier will purchase the remaining shares from OLX Group.
“We are excited to be increasing our ownership in Encuentra24, where we believe there is significant potential to accelerate its revenue growth,” FDV founder and CEO Shaun Di Gregorio said.
“This transaction is expected to unlock the value of FDV LATAM with 100% ownership and control, enabling the sharing of our transaction model IP and technology across the region.
"FDV LATAM represents a significant standalone business under FDV Group’s proposed new regional structure, with an attractive long-term growth profile and optionality in relation to future value realisation opportunities.”
Cap raise to fund acquisition and more
While FDV has already raised $35 million via an institutional placement at an offer price of A$1.50 per share, it will now turn its attention to a share purchase plan to raise up to approximately A$5 million at the same offer price as the placement.
The offer price for the SPP is a:
- 5.1% discount to the closing price of FDV shares of A$1.58 on Tuesday, December14, 2021 (being the last trading day prior to announcement of the capital raising.
- 2.3% discount to 15-day Volume Weighted Average Price (VWAP) of A$1.535 per share for the period ending on the last trading day prior to announcement of the capital raising.
Up to approximately 26.7 million new shares will be issued under the capital raising and all shares issued will rank equally with existing FDV ordinary shares on issue.
All shareholders will have the opportunity to participate, with encouraging participation for the placement coming from emerging markets funds across North America, Asia and Europe.
As for the placement, it was available to institutional, professional and sophisticated investors and closed on Thursday, December 16, 2021.
23,333,334 new shares are to be issued at the offer price, representing 6.8% of FDV’s existing issued capital.
Shares are expected to settle on Wednesday, December 22, 2021, and commence trading the following day on Thursday, December 23, 2021.
The $40 million in funds raised will be used for the upfront purchase consideration of Encuentra24 and to provide balance sheet flexibility to fund M&A pipeline and deferred/contingent consideration:
- Upfront cash consideration for OLX Group’s 37.5% interest in E24: ~A$13.1 million (US$9.2 million)
- Balance sheet flexibility to fund M&A pipeline and deferred/contingent consideration: ~A$21.9 million (US$15.3 million)
“While always very mindful of dilution to existing shareholders, we saw this measured capital raising as an opportunity to broaden our shareholder base. We are grateful for the ongoing support shown by our institutional shareholders and are delighted to welcome several specialist emerging market funds from North America, Asia and Europe,” Di Gregorio said.
FDV’s expanding footprint
Taking full ownership of E24 consolidates FDV LATAM’s position in the region and gives the company full control over the four wholly-owned operating companies across 11 key markets.
The major benefit will be the ability to facilitate greater sharing of FDV LATAM’s highly scalable transaction model technology.
Sharing intellectual property will be a key enabler of FDV’s strategy to accelerate revenue growth across the region and unlock the value of FDV LATAM.
There are also opportunities to optimise operating efficiencies relating to potential cost savings, including across finance, legal, HR and IT divisions.
The common language (Spanish) across FDV LATAM is expected to foster greater collaboration, innovation and knowledge sharing.
100% ownership of E24 should unlock the value of the region.
Accelerating property and auto transactions
E24’s Consumer-to-Consumer transaction initiatives are expected to provide a strong foundation for FDV to further accelerate property and auto transactions across E24’s markets.
E24 has 19 new property projects active and 112 in the pipeline.
Interestingly, less than 0.5% of E24’s revenue is from transactions which points to a transformational opportunity for FDV to augment its traditional classifieds base with transaction revenues.
FDV points to InfoCasas and its successful transaction revenue model, which utilises proprietary technology to power each step in the transaction journey as something for E24 to aspire to.
The increased shareholding in E24 follows on from key strategic acquisitions in the LATAM region, including the 100% acquisition of Fincaraiz, the 100% acquisition of Yapo and FDV’s move to 100% ownership of InfoCasas.