11 Aug 2021 16:14 ET
GlobeNewswire Not for distribution to U.S. news wire services or dissemination in the United States. mdf commerce inc. ("mdf commerce") (TSX: MDF), a leader in SaaS commerce technology solutions, is pleased to announce that it has entered into a definitive agreement with Periscope Parent Holding, L.P. to acquire the business of Periscope Intermediate Corp. ("Periscope") (the "Acquisition"), a portfolio company of Parthenon Capital Partners ("Parthenon Capital"). The purchase price is approximately $259.9 million, on a cash-free debt-free basis, subject to customary closing and post-closing adjustments (the "Purchase Price"). Periscope is a leading eProcurement solution provider with over 20 years of history that offers a fully integrated, end-to-end procurement solution to both state and local government agencies and suppliers in the U.S. Periscope's end-to-end eProcurement solution--offered through both a SaaS and a transaction fee solution--is built specifically for the public sector, allowing government agencies to more efficiently purchase goods and services, source contracts, analyze spend, post bids and transact on a public procurement platform that offers a consumer-like shopping experience. Periscope operates from its two offices in Austin, Texas, and American Fork, Utah. Legacy procurement systems are hindering U.S. state and local government agencies from efficiently and transparently getting the most value of over US$1.8 trillion in taxpayer funds for procurement purposes. Government agencies transacting through Periscope's network spend approximately US$20 billion per year, with opportunities to grow significantly as governments seek to optimize their procurement process. Together, mdf commerce and Periscope are well positioned to capitalize on governments' critical need to rapidly digitize procurement workflows, as well as on massive increases in government spending arising from the approximately US$1 trillion U.S. infrastructure spending bill, among others. Periscope's solutions, through its ePro product suite, are offered as both a SaaS solution and a transaction fee solution. Under its SaaS solutions, Periscope acts as a vendor to government agencies and suppliers and receives a fixed annual subscription fee. Periscope's transaction fee solution provides government agencies with an innovative way to self-fund their eProcurement solution. The transaction fee solution provides significant scalability as revenue becomes a function of statewide transaction spend. The successful onboarding of new customers on SaaS and transaction fee solutions has already driven increased growth, as seen through the first six months of 2021 revenues growing by 32.2% year-over-year, from US$10.9 million to US$14.4 million. Given year-to-date performance and high near-term visibility for contracted revenue and pipeline developments, management believes Periscope can achieve revenues of approximately US$33 million in calendar year 2021, compared to US$23.1 million in calendar year 2020, implying a year-over-year growth rate of 43.4%. Management believes strong industry tailwinds, including current trends toward eProcurement adoption, will underpin significant growth over the long term. "This is a very interesting day in the history of mdf commerce. The acquisition of Periscope marks a turning point in our transformation plan and solidifies our commitment to profitable growth. Periscope will strengthen our leading position in the North American public eProcurement industry. This accelerates our vision to become a leading player enabling the flow of commerce for the B2B and B2G markets," said Luc Filiatreault, President and Chief Executive Officer of mdf commerce. "With this transformational acquisition, we see a tremendous amount of accelerated growth across our combined platform. I'm very excited about the opportunity to lead mdf commerce's Strategic Sourcing operations as we evolve into full eProcurement, positioning us well for this new chapter of growth," said Mark Eigenbauer, President of mdf commerce Strategic Sourcing. Brian Utley, President and Chief Executive Officer of Periscope, said: "Today marks an important milestone in the history of Periscope since I founded the company in 2001. I am thrilled to join the mdf commerce team. Together, with our combined operational strengths, I am convinced we can accelerate the transformation of the public eProcurement industry." As part of the Acquisition, Parthenon Capital agreed to re-invest $4 million in mdf commerce shares, the maximum allowed under the applicable private placement rules given the concurrent investment by Investissement Quebec and Fonds de solidarite FTQ. Zachary Sadek, Partner at Parthenon Capital, said: "We believe that Periscope is a great strategic fit for mdf commerce and are pleased to participate in the upside potential as a new shareholder of mdf commerce going forward. We are appreciative of our successful seven year partnership with Brian Utley and the entire Periscope team and are excited to see them continue to support their customers and bring value to every dollar spent." The Acquisition has been approved by the board of directors of both mdf commerce and the governing entity of Periscope Parent Holding L.P. The Acquisition, which remains subject to certain customary closing conditions and receipt of applicable antitrust approval under Hart Scott Rodino Antitrust Improvements Act, is expected to be completed in the second quarter of mdf commerce's fiscal year 2022. Acquisition Rationale Becoming a Public eProcurement Leader in North American Market with Untapped Opportunities Fully Integrated, End-to-End Solution Servicing the Full Spectrum of Government Agencies Innovative Transaction Fee Solution Providing Highly Scalable and Attractive Economics Highly Synergistic Acquisition Expected to Provide Significant Revenue and Cost Saving Opportunities Compelling Combined Financial Profile Positioned for Enhanced Growth Financing of the Acquisition The Purchase Price will be financed through a combination of: Public Offering of Subscription Receipts on a Bought Deal Basis To finance the payment of a portion of the Purchase Price and related expenses, mdf commerce has entered into an agreement with Scotiabank, as sole bookrunner, and Echelon Capital Markets, as co-lead manager, on behalf of a syndicate of underwriters (the "Underwriters") under which they have agreed to purchase on a bought deal basis from mdf commerce 8,480,000 Subscription Receipts at a purchase price of $8.00 per Subscription Receipt (the "Offering Price") for gross proceeds of $67.8 million. Each Subscription Receipt will entitle the holder thereof to receive, upon the satisfaction of certain conditions and without payment of additional consideration or further action, one common share of mdf commerce. In addition, mdf commerce has granted the Underwriters an option to purchase up to 1,272,000 additional Subscription Receipts at the Offering Price at any time up to 30 days after closing of the Offering (the "Over-Allotment Option"), for additional gross proceeds of up to $10.2 million. The Subscription Receipts will be offered in all provinces of Canada pursuant to a short form prospectus to be filed by mdf commerce in accordance with National Instrument 44-101 - Short Form Prospectus Distributions. The issuance of the Subscription Receipts pursuant to the Offering is subject to customary approvals of applicable securities regulatory authorities, including the Toronto Stock Exchange ("TSX"). Closing of the Offering is expected to occur on or about August 31, 2021. The Offering is conditional upon closing of the Concurrent Private Placement (described below) are conditional upon each other. The Offering is also conditional upon there being no termination of the Acquisition or announcement of such termination prior to the closing of the Offering. Private Placement of Subscription Receipts Concurrently with the Offering, mdf commerce has entered into subscription agreements pursuant to which it will complete the Concurrent Private Placement with FSTQ and Investissement Quebec who will acquire, on a private placement basis and at the Offering Price, 3,587,667 and 2,989,722 Private Placement Subscription Receipts, respectively, for aggregate gross proceeds of $52.6 million. Each Private Placement Subscription Receipt will entitle the holder thereof to receive, upon the satisfaction of certain conditions and without payment of additional consideration or further action, one common share of mdf commerce. The Private Placement Subscription Receipts will be subject to a four month hold from the closing date of the Concurrent Private Placement. The issuance of the Private Placement Subscription Receipts pursuant to the Concurrent Private Placement is subject to the approval of the TSX. Closing of the Concurrent Private Placement is scheduled to occur concurrently with the closing of the Offering. The Concurrent Private Placement is conditional upon closing of the Offering. The Concurrent Private Placement is also conditional upon there being no termination of the Acquisition or announcement of such termination prior to the closing of the Concurrent Private Placement. Amended and Upsized Credit Facilities mdf commerce has received a committed term sheet from Scotiabank providing for amendments and upsize of its existing credit facilities by $20 million, to $70 million (the "Upsized Credit Facilities"), in order to partially finance the payment of the Purchase Price and for general corporate purpose. The net proceeds of the Offering, the Concurrent Private Placement and the Upsized Credit Facilities will be used by mdf commerce to finance the payment of a portion of the Purchase Price payable in respect of the Acquisition and the financing and transaction costs incurred as part of the Acquisition. Advisors Scotiabank acted as exclusive financial advisor to mdf commerce on the Acquisition, as sole bookrunner and co-lead manager on the Offering and as sole placement agent on the Concurrent Private Placement. Legal advice to mdf commerce is being provided by McCarthy Tetrault LLP with respect to Canadian law, and by Foley & Lardner LLP with respect to U.S. law. Legal advice is being provided to the Underwriters and the Private Placement Subscribers by Davies Ward Phillips & Vineberg LLP. Stephens Inc. is the exclusive financial advisor to Periscope. Periscope received legal advice from Jackson Walker LLP, Kirkland & Ellis LLP and Blake, Cassels & Graydon LLP. Conference Call Information mdf commerce will hold a conference call for the financial community on Wednesday, August 11 at 5:00 p.m. (Eastern Daylight Time). The dial-in numbers are (833) 732-1201 (toll-free) or (720) 405-2161 (international). A live webcast will be available: register here. Media may hear the call in listen-in only mode or tune in to the simultaneous audio broadcast on mdf commerce's website, which will then be archived for 30 days. Availability of Documents Copies of related documents, such as the preliminary short form prospectus, underwriting agreement, subscription agreements and stock purchase agreement relating to the Acquisition will be available under mdf commerce's profile on SEDAR at www.sedar.com and on mdf commerce's website at www.mdfcommerce.com. General Information In this press release, "mdf commerce" or the words "we", "our" and "us" refer, depending on the context, either to mdf commerce inc. or to mdf commerce inc. together with its subsidiaries and entities in which it has an economic interest. All dollar amounts refer to Canadian dollars, unless otherwise expressly stated. This press release is dated August 11, 2021 and, unless specifically stated otherwise, all information disclosed herein is provided as at June 30, 2021, the end of mdf commerce's most recent quarter. |