The combined entity is tipped to generate US$92 million in estimated revenues in 2018 and US$322 million by 2022.
According to Pareteum, shareholders of iPass will receive 1.17 shares of Pareteum for every share of iPass in an exchange offer for an aggregate total of 9.86 million shares of Pareteum’s common stock .
Pareteum, a cloud software platform company, is expecting to gain a “strategic position” with the acquisition as it targets new markets across a range of sectors like airline, hospitality, retail and Internet of Things (IoT).
The company will also take over the net debt of iPass, which stands at US$5.6 million as of September 30. However, the company’s earnings is set to increase by US$2 million with its Non-GAAP earnings tipped to be in the range of US$5.5 million.
Following the transaction, the company is expected to produce a strong growth in operating cash flow generation.
The transaction is expected to close in the first quarter of 2019 subjected to customary approvals with shareholders of Paretum holding 91 percent of the common stock with iPass shareholders holding the rest.
In a filing with the US Securities and Exchange Commission (SEC), it was noted that the merger agreement has certain clauses for each of the parties involved if the deal is not completed by March 18, 2019. Upon termination of the agreement, or if iPass decides to pursue a “superior deal”, the company is required to pay a termination fee of US$780,000.
While it was said that iPass would be delisted from NASDAQ and OTC, the company has already been delisted from the NASDAQ due to low market value.
“Our integration with iPass extends not only Pareteum’s customer base, but also our portfolio of services,” Denis McCarthy, president of Pareteum, said in the release. “Customers will now be able to use the Pareteum Global Software Defined Cloud to access premium wireless and Wi-Fi services, and experience location data analytics for a truly immersive experience.”
In a presentation to its shareholders, Pareteum described numerous reasons for the acquisition, including the foundation of a strong platform for future acquisitions and market consolidations. The company dubbed the combined entity as Pareteum version 3.0,which is tipped to generate US$92 million in estimated revenue in 2018.
Further, the company said that revenue could be in the estimated range of US$322 million by 2022.
“By joining with Pareteum, our vision for iPass SmartConnect is amplified and expanded,” Garry Griffiths, CEO of iPASS, said in the release. “Being part of Pareteum’s constellation is exciting, and clearly in the best interest of iPass shareholders, customers, business partners and employees.”
Following the announcement on Monday, shares of Pareteum were down 1.9 percent in the aftermarket hours on Monday and 7.91 percent on Tuesday. Pareteum closed the market on Tuesday at US$1.98 after opening the trading session at US$2.05 with the stock reaching a high of US$2.15 and a low of US$1.81. The stock has gone down 24.43 percent in the last month and 21.12 percent over a the three month period. Over 2.92 million shares of Pareteum were traded on Tuesday.
Pareteum has a “Sell” ranking on TradingView with 14 verticals against, two in favor and 10 in neutral. However, the stock has a “Moderate Buy” ranking on TipRanks with an analyst target price of US$5,representing a 152.53 percent increase from its current price.
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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.