UK expansion through acquisition has Family Zone investors excited…
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The Family Zone Cyber Safety Ltd (ASX: FZO) share price is soaring higher today after resuming trade. This follows the cyber safety company entering a trading halt on Friday with the announcement of a $142 million acquisition.
Since returning to trade, investors have been buying into the company. At the time of writing, the Family Zone share price is swapping hands for 70.5 cents, up 17.5%.
The company’s ambitious acquisition is worth nearly half the current value of Family Zone which has a market capitalisation of $294 million.
Let’s check out the details.
On Friday, Family Zone revealed it had executed a binding agreement to acquire United Kingdom (UK)-based digital safety solution provider Smoothwall.
The company is the UK’s leading provider of monitoring and filtering products to the education sector.
Smoothwall services approximately 38% of the UK’s education market. To detail the extent of its market presence, it currently provides services to more than 12,400 schools and 6 million students.
This translates into A$30 million of annual recurring revenue and a pro-forma earnings before interest, tax, depreciation, and amortisation (EBITDA) of roughly A$7 million for the last financial year.
Family Zone believes the acquisition of Smoothwall creates “…the world’s most compelling K-12 digital safety solution incorporating Family Zone’s fast-growing Linewize K-12 solutions, Family Zone’s parental controls, and Smoothwall’s scale and world-leading solutions”.
Accompanying the acquisition announcement was the reveal of a A$146.4 million capital raise to fund the attainment at 55 cents per share.
This would be comprised of a fully underwritten institutional placement of A$71 million and a non-renounceable entitlement offer of A$75.4 million.
As of today, we now know Family Zone has been successful in raising $114.1 million through the institutional offer. Subsequently, the retail offer is aiming to deliver another $32.3 million in capital. The retail offer will open to investors on 11 August 2021.
What’s next for Family Zone and its share price?
The retail portion of the capital raise will close on Friday 20 August 2021. Following this, the announcement of the retail raising outcome will be made on 25 August.
Additionally, It is worth noting that shareholders will experience a significant share dilution.
With roughly 266 million new shares on issue, this would represent more than a 60% increase in shares outstanding. There is potential that such dilution may put downward pressure on the Family Zone share price.
Finally, in Family Zone’s recent June quarter results, the company outlined strong momentum for its immediate future. This is largely driven by the sales cycle and US funding. However, positive regulatory changes are also expected to act as tailwinds.
Should you invest $1,000 in Family Zone Cyber Safety right now?
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.