Simply Secure Limited has strengthened its foothold in tTech Limited by acquiring an additional 20% of the company, bringing its total stake to an overwhelming 69.08% of tTech’s ordinary shares. This acquisition has prompted the St. Lucian-based company to initiate a mandatory takeover offer to purchase the remaining shares from tTech’s shareholders.
On Friday, Simply Secure, an International Business Company (IBC), spent approximately $45.95 million to acquire 21.2 million more ordinary shares in tTech. This purchase increases Simply Secure’s total holding to 73.2 million shares. The shares were acquired from two St. Lucian holding companies, Enqueue Inc., owned by Norman Abraham Chen, and Auctus Holdings Inc., owned by Gordon Christopher Reckord, both former CEOs of tTech. Chen and Reckord are set to resign from tTech’s board in the wake of this transaction.
Edward “Teddy” Alexander, Chairman and Co-Founder of tTech, acknowledged the contributions of the departing executives and expressed optimism for the company’s future under Simply Secure’s increased ownership, stating, “We look forward to the continued growth that is expected through the increased ownership in the company by Simply Secure.”
Simply Secure’s initial acquisition of a 49.07% stake in tTech took place in mid-July, for a total cost of around $160.37 million. With this additional purchase, Simply Secure now controls the majority of tTech’s shares and has triggered a mandatory offer under the rules of the Jamaica Stock Exchange (JSE).
What Does the Takeover Bid Mean?
According to JSE regulations, any acquisition of more than 50% voting rights in a company triggers a mandatory offer to all remaining shareholders. The offer must be made at the same price for all shareholders, allowing them to either accept or decline the bid. The offered consideration may come in the form of cash, shares, or other assets, and the company is required to provide key details about the offer in a formal takeover bid circular.
Simply Secure is obligated to make this offer within 30 days from November 15, 2024, marking the date it officially gained control of tTech. As part of the process, tTech’s board will issue a directors’ circular, offering guidance to shareholders on whether to accept or reject the takeover bid.
Potential Limitations on Simply Secure’s Acquisition
Despite the significant stake Simply Secure has acquired, it is unlikely that the company will push its ownership beyond 80% of tTech’s ordinary shares. This limitation is due to the JSE’s listing rules, which require at least 100 shareholders to collectively hold at least 20% of the company’s shares. Therefore, Simply Secure will likely refrain from acquiring more than 11.5 million additional shares to maintain tTech’s public listing status.
The latest shareholding list shows that, in addition to Simply Secure, the top 10 shareholders of tTech include Enqueue, Auctus, and other institutional investors such as Mayberry Jamaican Equities Limited. The estate of the late co-founder Hugh O’Brian Allen is another unknown factor, with his 8.4 million shares still in the probate process.
tTech’s Recent Financial Struggles
Since Simply Secure’s initial investment in July, tTech has been undergoing a restructuring aimed at increasing operational efficiency. This restructuring, which includes merging operational teams and consolidating support desks, has been seen as a necessary step to position the company for growth in a competitive market. However, the restructuring also led to a 44% spike in third-quarter expenses, totaling $56 million.
tTech reported a net loss of $5.9 million for the third quarter, a sharp contrast to the net profit of $5.8 million recorded during the same period last year. The company also saw a dip in gross profits by 15%, dropping to $43.6 million. Over the first nine months of the year, tTech’s total revenue decreased by 5%, down to $336 million, while operating losses ballooned from $231,000 to a net loss of $75,000.
Despite these setbacks, tTech’s total assets have grown by 11%, reaching $357 million, driven largely by an increase in cash and resale agreements.
Stock Market Performance
Following the news of Simply Secure’s acquisition, tTech’s stock price rose by 15%, reaching $2.53 per share, bringing the company’s market capitalization to $268.18 million. Though this represents a slight increase from its IPO valuation of $265 million in 2016, tTech’s market cap has fallen from an earlier peak, reflecting the challenges the company faces in the competitive tech industry.
Looking Ahead
The mandatory takeover offer by Simply Secure is likely to be a pivotal moment for tTech, as the company navigates a future with new leadership and ownership. While the recent restructuring initiatives may hold promise, the financial pressures are evident, and the market will be closely watching how the takeover bid unfolds. The integration of Simply Secure’s expertise and resources could provide a much-needed boost to tTech, but only time will tell if the company can regain its momentum in the face of these challenges.
