Synchronica buys Nokia messaging business

30th Jun 2011 11:33

Synchronica has conditionally agreed to buy Nokia's operator branded messaging (OBM) business for about $25m, giving the mobile phone messaging provider access to the lucrative North American market. Synchronica said that with this deal it will acquire the source code for Nokia's messaging infrastructure and device client software for email, instant messaging and social networking, as well as related patents and patent applications.Synchronica expects to fund the deal by raising $15m and said it has secured commitments for funding from existing and new institutional investors through a private placement financing in the UK and North America. According to the deal terms, $21m will be deferred and paid quarterly in arrears at a rate of 22% of the revenue earned by Synchronica from the assets acquired, while the rest of the $4m will be paid on completion of the deal. In addition, Nokia will be issued 18.3m warrants in respect of ordinary common shares in Synchronica.In accordance to AIM rules and trading, the acquisition is considered to be a reverse takeover and Synchronica's shares have been temporarily suspended accordingly."Many transactions are described as transformational and this, assuming it goes through at the GM [general meeting], certainly fits the bill," broker Northland Capital opined. "Synchronica gains a sizeable foothold in the North American market, massively expands its number of active subscribers, substantially increases its North American operations and accelerates its shift towards higher visibility recurring revenues. Nokia also becomes a key partner (and potentially a significant shareholder)," Northland analyst David Johnson said. "From Nokia's perspective the OBM business had become non-core but, as with the situation with Neustar earlier in the year, it needed to find an appropriate home for the business as OBM's customers remain key audience for Nokia's handsets and Synchronica is well placed to re-energise the business," Johnson added.Northland has stuck with its 53p price target and buy recommendation for Synchronica. Synchronica's shares were trading at 17.5p, prior to being suspended.AR