Shearwater Group to buy authentication software provider for £20m

Shearwater Group, previously Aurum Mining, is to buy SecurEnvoy, a provider of authentication software, for £20m, subject to shareholder approval at the next general meeting on 8 May.

The AIM-listed technology company will pay £10m in cash and £10m through the issue of 200m shares at a price of 5p each, which is a 17.95% discount on the mid market price on close of trading on Wednesday.

The £10m in cash will be part funded from a share placing to raise up to £8m with an open offer of 25.48m shares at 0.04p for shareholders to subscribe for up to £1m worth of new shares.

The acquisition is part of the company’s transformation strategy to establish a presence within the identity and access management sector.

SecurEnvoy, whose founders will remain with the company after the close of the acquisition, recorded sales of £3.2m, generated earnings before, interest, tax, depreciation and amortisation (EBITDA) of £2.2m in 2016. This represents a “historic” 9.3 times EBITDA acquisition multiple.

Shearwater chairman David Williams said the acquisition “represents a very important first step in our ambitious growth plans, and is an excellent example of the type of business and team we wish to partner with”.

"Companies of all sizes are needing to evaluate their digital resilience capabilities, and authenticating the user is fundamentally important in protecting a company's information assets.

The acquisition of SecurEnvoy establishes our presence within the large and growing identity and access management sector, and is the first of what we hope to be many transactions in support of our strategic aim of building a UK based digital resilience group."

Shares in Shearwater Group down 9.09% to 4.43p at 1019 BST.