Monitise Acquires Clairmail

From looking at the Clairmail site this looks like Monitise is trying to accelerate its adoption in the USA while also acquiring some US specific technology and clients. Right now I think its a race to see who can establish the largest base for mobile payments and this acquisition raises Monitise profile considerably. However it comes at the expense of a massive increase in an already high share count which concerns me. However the combined group is now in a better position to lead in this area without confusing clients by competing. I have worked in this USbanking arena myself with software and I know that Banks like to deploy solutions from big companies, they are always scared of being left without support, so for the US this is a good move for Monitise.

Acquisition of Clairmail Inc.

Further enhances Monitise's global leadership position in mobile money

 Accelerates penetration of the US market

Expected to be earnings accretive before end of calendar 2013 

Monitise plc, (LSE: MONI.L), the technology and services company delivering mobile banking, payments and commerce networks worldwide, announces that it has entered into an agreement to acquire Clairmail Inc., a leading US provider of mobile banking and payments solutions (the "Acquisition"), further enhancing Monitise's position as the global leader in the fast expanding mobile money market. Clairmail is growing rapidly with revenues in 2011 up by 90% year on year.  The Acquisition consideration will be satisfied entirely by the issue of up to 312,787,144 new Ordinary Shares representing approximately 26.5% of the fully diluted share capital of the enlarged Company¹, post completion, and values Clairmail at approximately US$173²m (£109m), based on Monitise's share price of 35.0 p as of the close of trading on March 23, 2012. The deal is conditional upon US regulatory and shareholder approvals. It is expected that the Acquisition will be completed before the end of the financial year 2012.

·     The Acquisition creates a world class team with an in-depth knowledge of the US and global markets. The Clairmail management team and employees are expected to remain with the Enlarged Group with Pete Daffern CEO, of Clairmail, working closely with Frank D'Angelo, Executive Chairman Monitise Inc. and former Executive Vice President of Payment Solutions at FIS, as Monitise focuses on accelerating its significant growth opportunity in the US.

·     The Enlarged Group has 600 staff across North America, Europe, the UK, Asia-Pacific, Africa and India, providing an unprecedented level of expertise in this high growth space.

Financial summary and outlook:

·     Like Monitise, Clairmail is in the high growth stage in addressing the substantial global mobile money opportunity.

·     Clairmail's revenues grew by 90% in calendar 2011 to US$18m³ (£11m), with a minimum contracted order book at year end of US$47m (£30m), plus an additional US$36m (£23m) of expected user generated revenues from existing contracts.

·     On a pro forma basis, the Enlarged Group's revenues for calendar 2011 would have been US$56m⁴ (£35m), with a minimum combined order book at year end of US$178m (£113m), plus a further US$226m (£143m) of expected revenues from existing contracts.

·     Combined pro forma revenues for calendar 2012 are expected to be close to US$100m.

·     The EBITDA⁵ loss for Clairmail in calendar 2011 was US$21m⁶ (£13m), giving a pro forma EBITDA loss for the Enlarged Group of US$43m (£28m).

·     Before the end of calendar 2013, Monitise expects the Acquisition to be earnings accretive and the Enlarged Group to achieve EBITDA breakeven, with gross margins in excess of 70% by June 2013.

·     The Enlarged Group's net cash balance on a pro forma basis at the end of calendar 2011 was US$73m (£46m).