Bond buys US rival

21st Oct 2010 15:50

Recruitment software provider Bond International Software is acquiring staffing software supplier VCG and raising £6.17m gross from the issue of ordinary and non-voting convertible shares. The deal is structured so that VCG merges with Bond's US subsidiary. VCG is valued at $1.09m - with $500,000 held in escrow - but Bond will also pay $7.26m to promissory note holders and contribute $649,000 to VCG to enable it to pay off other note holders. These are estimated amounts and may be adjusted for working capital. The total is $9m (£5.7m) so the proceeds from the fundraising will cover this. VCG generated $6.79m in revenues in 2009 and that included $5.67m of recurring revenues. The pre-tax profit was $374,000. TSX-listed Constellation Software Inc, which owns 13% of Bond, is subscribing for all of the ordinary and non-voting convertible shares. This will give Constellation 24% of the ordinary share capital. The convertibles can only by converted if the resulting ordinary share stake does not go above 24% - or 29.9% after 20 October 2015. If Constellation retains a stake of at least 20% it has the right to appoint a director. In the six months to June 2010, Bond swung from a profit of £799,000 to a loss of £680,000. Revenues fell 11% to £15.1m. Trading is improving in the second half and there are signs of recovery in staffing software, which has been hit by difficult trading conditions. Some customers that have postponed buying decisions are starting to appear nearer to making a decision.