Falanx announces bookbuild to fund purchase of First Base

Intelligence, security and cyber defence provider Falanx announced a proposed fundraising and conditional acquisition of First Base Technologies on Tuesday.

The AIM-traded company said it intended to raise up to £4.6m before expenses via a placing of new ordinary shares, at a price of 4.5p each.

It said the proceeds would be used to fund the purchase of First Base, and the remainder for working capital, integration, development expenditure and transaction fees.

The placing shares were being offered by way of an accelerated bookbuild on the company's behalf by its sole bookrunner, Turner Pope Investments.

It said the bookbuild was launched immediately following its announcement on Tuesday morning.

Conditional on that placing, the company said it would purchase the assets of First Base for a cash consideration of £3.2m.

The founders of First Base, Peter Wood and Didi Barnes, would also receive warrants to subscribe for 800,000 shares in the company with an exercise price of 4.5p per share.

“First Base is a profitable cyber security testing and consulting business which was established in 1989,” the Falanx board said in its statement.

“It has a broad spectrum of experience and a customer base of around 200 customers.

“These customers are spread over multiple vertical markets and range from SMEs to FTSE 100 organisations.”

As well as traditional assessment and penetration services, First Base was growing a wider consulting practice including ‘red team’ assessments on wider organisational vulnerabilities.

The business is based in Sussex, near Gatwick Airport.

In the year to 31 March 2017, it reported revenues of £1.8m and EBITDA of £0.6m, and had a net asset value of £0.7m.

Falanx said First Base also benefited from “strong” cash generation.

Over recent periods, it achieved annual revenue growth in excess of the wider industry growth rate, and was said to be trading well in its current financial year.

The acquisition was structured as an asset purchase, as First Base is a limited liability partnership.

Its 16 staff and customer relationships and contracts would transition into a new wholly-owned subsidiary of Falanx, along with a normalised level of working capital.