Close the Loop Ltd (ASX:CLG) entered into an agreement to acquire ISP Tek Services LLC and Captive Trade Corporation for $66 million on March 17, 2023. As part of the agreement, CLG to pay $35 million in cash upon closure of the transaction. $11 million of CLG shares to be issued at settlement based on the 30-day VWAP, 3 years, 4% interest bearing convertible note of $7.5 million that can be converted into CLG shares at a rate of 74 cents or repaid in cash at the discretion of the vendor at the expiry of the note term, 3 years, 4% interest bearing convertible note of $7.5 million that can be converted into CLG shares at a rate of 74 cents or repaid in cash at the discretion of the purchaser at any time during note term, Earnout of up to $5 million if CY23 EBITDA exceeds $12 million, with the additional $5 million committed to be paid within five working days of the audited financial report being published.

Acquisition of the operating business on a cash-free and debt-free basis including infrastructure. The transaction will be financed from AUD 45 million ($29.899 million) placement. Close the Loop has partnered with Pricoa Private Capital, the private capital arm of PGIM, to establish a $40 million senior secured term loan, a $7.5 million revolving credit facility and a $5 million delayed draw term loan facility to support the acquisition and future growth ambitions of the Group.

ISP Tek Services and Captive Trade recorded $32m of revenue in CY21 with adjusted NPAT of $8.7 million and revenue for the trailing 12 months to October 2022 of $49 million with NPAT of $13.7 million. Following the completion of the transaction, the Saloum’s will be substantial shareholders of Close the Loop. They will continue to manage the ISP Tek Services business and assist the existing Close the Loop management team with the global expansion of ISP Tek Services.

ISP Tek Services founders Sammy and Dania Saloum will be substantial shareholders of CLG following the transaction. Close the Loop plans to hold a general meeting of shareholders on April 21, 2023, to obtain shareholder approval for the second tranche of the placement, in which case these New Shares will be issued on or around April 28, 2023. The transaction is expected to be closed on or around April 30, 2023.The transaction is expected to be circa 100% accretive on an EPS basis post-acquisition.

David Schiavello, Lisa Marcus, Elizabeth Hanrahan, Andrea Wookey of Thomson Geer and Sidley Austin acted as legal advisors to Close the Loop Ltd.