A US data centre maintenance company has agreed to pay US$115 million cash (S$156 million) for all the assets of Procurri's third-party hardware maintenance business.

The consideration translates into approximately 55 Singapore cents a share (ie S$156 million divided by 284.7 million outstanding shares).

That far exceeds the stock's trading range of 41.5 - 47 cents today, the first day of trading post-announcement on the potential transaction. 

There is still much value left in Procurri's two other business segments -- IT Asset Disposition and IT Hardware Resale -- as they account for about half of Procurri's gross profit. 

Stock price 

42.5 c

52-week range

22 – 47 c

Market cap

S$121 m

PE (ttm)

21

Dividend yield 

--

Year-to-date 
return

52%

Shares outstanding

284.7 m

Source: Yahoo!

Its hardware maintenance business was the subject of an unsolicited, non-binding letter of intent from Park Place Technologies, LLC, which has completed at least 11 acquisitions since 2016

Procurri had, on 21 Nov 2019, agreed to revised terms, and announced it on 22 Nov (Friday).


Park Place is a third-party maintenance company backed by private equity and supporting assets in over 141 countries globally and has over 1,300 employees.

A definitive agreement for the purchase of Procurri's business is subject to, among other things, the receipt by Park Place of formal approvals from its board of managers and equity fund majority owners. (For details, see Procurri's announcement here). 



This potential unlocking of value at Procurri follows on Novo Tellus PE Fund 2, L.P. and its co-investor A.C.T Holdings, collectively taking a 29.86% stake in Procurri.

It's anything but a passive stake. Novo Tellus' playbook is to be an active partner bringing its deep industry knowledge to bear.

As Procurri's CEO, Sean Murphy, said in March 2019: "With their record of close and successful partnerships with management teams to grow companies globally, we are excited to have Novo Tellus as our new investment partner.”

Investor attention could turn to ISDN Holdings, in which Novo Tellus has been building up its stake in the past few months and helping to enhance its business value. (See: 

Procurri experienced sharp growing pains in 3Q2019 as its staff costs jumped S$1.7 million.

3Q19
(S$‘000)

3Q18
(S$‘000)

Change
(%)

Revenue

55,803

55,382

0.8

Gross profit

20,804

19,839

4.9

Gross profit margin

37.3%

35.8%

1.55 points

EBITDA

4,297

5,100

(15.7)

Pre-tax profit

1,035

2,682

(61.4)

Net profit

1,089

1,422

(23.4)

The hiring of scores of extra engineers was to deal with increased customer issues after Procurri brought in-house formerly outsourced networking and server services at an acquired US company, Rockland Congruity.

"This integration of our maintenance portfolio overwhelmed the system that was currently in place. We decided to increase engineering headcount and put temporary processes in place," says Procurri in its 3Q19 financial results statement.

The worst is over at Rockland, in which Procurri acquired, in April 2019, the remaining 49% stake it didn't own.

"We expect our operating metrics to return to historical levels by end of Q1 2020."

 

Procurri: "A 21st century IT vendor"

SeanMurphy11.19b"The IT world was set up decades ago where OEMs manufacture new computers, they sell to the world’s largest companies which keep them for a few years and then replace them.

"We started Procurri in 2013 to address the new world and the new world is, the biggest companies have pains -- they have too many computers, they don't have them in the right locations, they want to keep their computers longer, they're moving workload to the cloud.

"They need a 21st century IT vendor, and that's what we're trying to build. Some people are mistaken about us being a low-end hardware distributor. We are not. We are a 21st century technology solutions provider. At the highest levels of these companies, CIOs have got pains that only a company like Procurri can fix. Our clients are some of the most important companies in the world.
"

- Sean Murphy, 
Chairman & CEO, Procurri,
at 3Q19 results briefing on 5 Nov 2019.

(NextInsight photo)

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