NEXION Group to triple in size after acquiring two Kiwi IT companies

As long as it can satisfy a detailed list of requirements, NEXION Group (ASX:NNG) is set to triple in size after it acquires two IT companies in NZ. 

Investor interest in the deal is self-evident: the company’s share price is up 19.05% in mid-afternoon trade to 10c. 

The move makes sense, given the company’s role as a publicly listed cloud infrastructure and IT player overall. 

NEXION’s ‘OneCloud Node’ puts together its own patent cloud solutions along with Amazon AWS and Microsoft Azure, offering cloud computing packages to its customers. 

So, who has NEXION acquired? 

NEXION is set to acquire Aiscorp and Silicon Systems.

Aiscorp started out as an early AI technology company before being purchased in the late 80s, and transformed into an IT infrastructure player. 

The company retains a number of government contracts in NZ, alongside private sector constituents. 

Silicon Systems, meanwhile, was first established in 1991 and enjoys significant commercial activity in Wellington. It specialises in cloud services provision moreso than Aiscorp, and is overall a larger company. 

FY22 earnings for AIscorp sit at NZ$0.37m; Silicon Systems reflects NZ$0.87m. 

Worth noting is that the company expects the acquisitions to provide it with a stepping stone into the Americas. How, exactly, that will unfold, remains unelaborated. 

Not out of the woods yet 

Investors should also note NEXION Group has not acquired the companies yet. There are a number of ticks the company must provide its targets to satisfy the deal. 

NEXION must pay Aiscorp NZ$8.15m and Silicon NZ$6.15m before the deals go through. 

Further, there is a requirement that NEXION will raise over $7m before the acquisitions go ahead. To that end, the company is currently in liaison with an undisclosed lender for $8m in capital; it is also examining debt facilities up to $2m.

The board and shareholders must also approve the acquisitions. 

And then there’s dilution

Those acquisitions have another clause, and this is where things get technical. 

NEXION is to pay a minimum number of shares calculated at 1.1 times its revenue, divided by 20 cents per NNG shares, with vendors able to take up to 42% of the valuation in cash. 

Should shares be less than 20c (currently, they are 10c,) then the company will issue an adjusting amount of shares to make up the difference. Performance rights up to an additional 100% share of the company’s FY22 revenue will also be issued. 

Settlement for the deal is due by late November; if conditions are not met, the deal may fall through altogether. 

Nexion, at this time, only has a market cap of $8m, and it has lost -41% year to date. Though, shares are up 21% on a one-month basis. 

Nexion's three month charts. Will today's deal be enough to get it back to par with the information index? (XIJ)