IQGeo recommends $421.7m US takeover
Geologist Bidco Ltd (Bidco) is a newly formed company wholly-owned by funds advised by Kohlberg Kravis Roberts & Co. L.P. and its affiliates. The boards of Bidco and IQGeo have reached agreement on the terms of the recommended cash acquisition of the entire issued and to be issued ordinary share capital of IQGeo.
Shareholders of AIM-quoted IQGeo will be entitled to receive 480p cash for each share – a hefty premium.
The offer values the entire end-issued capital of IQGeo at around £333 million on a fully diluted basis and implies an enterprise value of approximately £316m ($400.2m). That’s more than 20 times IQGeo's In-year recurring revenue of £15.7m for FY2023.
KKR will take IQGeo private – another blow to the UK Stock Exchange.
KKR reveals it has been assessing IQGeo and its business for a number of months and recognises the Cambridge company’s differentiated and modern product, proven management team and strong value proposition for its customers.
It adds that IQGeo operates in a sizeable and fast-growing geospatial software market, providing critical software and services to support leading operators within the telecoms and utility segments across their full lifecycle, from network design to operation.
KKR says it sees an opportunity to accelerate IQGeo's transition towards a recurring software centric business model and the development of IQGeo's future product roadmap under private ownership.
IQGeo's sector is developing rapidly, as fibre and grid infrastructure are undergoing major transformation and upgrades to deliver against national connectivity and sustainability goals.
For this, says KKR, IQGeo will require significant investment that is likely to reduce profitability in the short to medium term but build the strong operational foundations required to support IQGeo's next phase of growth, scale its platform globally and drive sustainable long-term value.
As such, KKR believes that moving to private ownership is in the long-term interest of IQGeo, its customers and its other stakeholders. Consistent with this approach, KKR is financing the cash offer entirely from equity and says it has a conservative approach to leverage to focus cash generation on investment for the future.
It vows to further expand the breadth of IQGeo’s software solution suite via incremental product upgrades and new capabilities as well as scaling key operational areas including sales and corporate development to sustain IQGeo's existing commercial momentum. It promises to back IQGeo's international expansion plans and back potential strategic acquisitions.
IQGeo reveals that over the last two years the company has received numerous unsolicited approaches but no one has put forward an offer that the board would be prepared to recommend to shareholders.
Now discussions with all other parties who have approached IQGeo in the past two years or were involved in the recent process have been terminated.
As Business Weekly readers will know, it was in January 2019, after Ubisense Group plc disposed of its RTLS SmartSpace technology and brand, that the company changed its name to IQGeo Group plc and repositioned to focus on its geospatial software solutions business. IQGeo employs over 200 professionals across offices in the UK, US, Canada, Belgium, Germany, Japan, and Malaysia.
KKR will invest in the acquisition largely through KKR's Global Impact Fund II, a $2.8 billion war chest dedicated to investing in companies whose products and services contribute measurable progress toward the United Nations Sustainable Development Goals, as well as through KKR's Next Generation Technology Growth Fund III, an approximately $3 billion treasure trove dedicated to growth equity investment opportunities in the technology space.
The takeover should become effective in Q4 of this year. Business Weekly has learned that IQGeo will not only continue to operate under that brand from its Cambridge HQ but also expects the additional investment promised under the prospective acquisition to underpin a fresh recruitment drive.
Paul Taylor, Chair of IQGeo, said: "Having served on the IQGeo Board since February 2011, I am immensely proud of the strategic decisions and operational execution which has established IQGeo as one of the leading providers of geospatial software solutions to telecoms and utilities operators globally.
“Under the leadership of the current management team, IQGeo has delivered strong revenue growth and shareholder returns of over 9x over the last five years.
“KKR's proposed offer underscores IQGeo's highly successful cloud-based software and services, and represents an attractive valuation and an opportunity for shareholders to receive certainty through cash consideration, not only for value created in recent years but also the future platform value of IQGeo. The proposed acquisition will provide IQGeo with the ownership structure and investment required to unlock its full potential.”
CEO Richard Petti added: “We are committed to the success of our customers and our employees. Thanks to them, we have built a thriving business that delivers award-winning innovative software for the telecommunication and utility industries worldwide.
“The proposed acquisition is in direct response to this success, creating an opportunity for us to accelerate investment in our people, processes and products and increase our ability to respond to market momentum.
“It's also important to us that there is close cultural alignment between KKR's Global Impact and Technology Growth funds with IQGeo's focus on innovation and mission to bridge the digital divide and build the net-zero energy networks of the future. Their investment will underpin the next phase of growth of IQGeo's exciting journey.”
