TIDMFLX
RNS Number : 2450O
Falanx Group Limited
06 October 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
6 October 2021
FALANX GROUP LIMITED
("Falanx", the "Group" or the "Company")
Sale of Assynt for GBP4.6 million
Falanx Group Ltd, the AIM listed cyber security company,
announces that it has entered into an agreement to dispose of its
Assynt Strategic Intelligence Division ("Assynt") for an estimated
cash consideration of GBP4.6 million to Cross Atlantic Solutions
LLC ("CAS") (the "Disposal").
Highlights
-- Falanx sells its Strategic Intelligence Division, Assynt, for GBP4.6 million
-- Strong strategic rationale to sell
-- Following the sale of Assynt, Falanx has become a pure play cyber security business
-- Proceeds of Disposal to be used for potential earnings
enhancing acquisitions within cyber security, organic investment
into sales and general working capital
Consideration
-- The gross consideration payable by CAS represents an implied
value of approximately 0.87 pence per Ordinary Share
Principal reasons for the sale
Falanx previously operated as two separate divisions, namely
Cyber Security and Strategic Intelligence (through Assynt). Assynt
is a well-recognised and respected business and has a dedicated and
expert team in place. However, both service lines and client bases
are very different, with cyber focusing on SME's and Assynt
focussed on global corporate and governmental users and, as a
result, there has only been limited cross-selling. There is also
limited scope for operational efficiencies outside of basic
back-office sharing.
Accordingly, the Company believes that its best prospects for
future growth are by focusing as a pure play business focused on
the fast-developing cyber security market, particularly given the
sector's strong macro-economic drivers which have accelerated since
the start of the COVID-19 pandemic. Cyber security has now become a
business essential and not just an optional extra. Falanx Cyber has
invested significantly in aligning its services with this market
and is now experiencing much greater demand for its penetration
testing and cyber security monitoring services, particularly
following the launch of its Triarii cyber protection platform. The
Cyber Division's channel partners are accelerating their
requirements and the spin out of N-Able Inc from SolarWinds Inc.,
which completed in July 2021, only further increase this potential
with improved access into their 25,000 MSPs and 500,000 end
users.
The net proceeds of the Disposal, combined with the recently
announced Growth Loan facility with BOOST&Co, will give Falanx
greater financial resources to make earnings enhancing acquisitions
as well as organic investment in sales and marketing, delivery
capability and continued service enhancement and innovation.
Falanx Assynt Limited
Assynt provides market-leading geopolitical reporting and
analysis focused on key major emerging markets and overarching
global themes. Assynt has been recognised by Chambers &
Partners, listed in their 2021 rankings as one of only five firms
in their top tier of global geopolitical risk providers. Assynt's
client base includes some of the largest and most recognised global
corporate names.
The Assynt Report focuses on the strategic intelligence needs of
global corporates (many of which are headquartered outside of the
UK), where it has produced over 1,200 reports analysing key
geopolitical events in over 40 countries, including specialist
analysis of international jihadist trends and more recently the
impact on COVID across the world. In some cases, Assynt's customers
request Assynt's embedded analysts to integrate Assynt's
geopolitical understanding and business-focused analytical
expertise into the host client's operational capabilities.
Assynt has made good progress in developing its recurring
revenue model for the provision of strategic intelligence by the
provision of embedded analysts and report subscriptions. In the
year ended 31 March 2021 it recorded revenues of cGBP2.1 million
and an adjusted EBITDA of GBP0.1 million. Assynt made a loss before
tax for the year ended 31 March 2021 of GBP0.06 million.
Overall Group revenues (including Assynt) were GBP5.24 million
for the year ended 31 March 2021, with an Adjusted EBITDA loss of
GBP1.26 million and loss before tax of GBP3.56 million, of which
GBP2.15 million related to non-cash charges including GBP1.44
million for the impairment of the investment in Furnace which was
spun out in December 2019. Further details on both Assynt and the
Group are contained in the Company's announcement of its audited
results for the 12 months ended 31 March 2021 released on 29
September 2021.
Transaction details
Falanx Assynt Ltd (including its four overseas wholly owned
subsidiaries in the UAE, USA, Hong Kong and Ireland) has been
acquired by CAS, a wholly owned subsidiary of Cross Atlantic
Solutions Partners LLC, which is backed by funds advised by a US
based investment firm focused on investing in information,
marketing and tech-enabled services businesses.
The consideration for the Disposal is as follows:
-- overall consideration of GBP4.6 million in cash on completion
("Consideration") before the deduction of a working capital,
adjustment based on completion accounts of Assynt of approximately
GBP0.5 million; and
-- GBP0.35 million of the Consideration will be held in separate
escrow against any potential warranty issues for twelve months from
completion.
As is customary, the Company will make certain warranties and
give certain indemnities to CAS in respective of Assynt's historic
business and the Company will ensure that a normalised level of
working capital remains within Assynt at completion. All of
Assynt's employees are transferring as part of the Disposal.
Following the Disposal, the Company and CAS have agreed that the
Company will provide certain administration services to Assynt
until the end of January 2022 as part of an orderly hand over, such
services which are governed under a transitional services
agreement, and which are provided on an arms-length basis.
Mike Read (CEO) Commented: "I am delighted to announce this
transaction. Falanx is now a pure play Cyber Security business. Our
decision to invest in both our cyber products and services has made
Falanx a very good fit with this high growth market. The recent
announcements on Triarii and f:CEL have generated interest across
our customer base and our major partners. Organisationally, Falanx
now has a much simpler structure and the net proceeds of the
Disposal give us a strong balance sheet with which to invest
further in our products and services, as well as consider earnings
enhancing acquisitions to broaden our portfolio."
"We are delighted that Assynt, which has had strong contract
wins in recent months, will be in an environment where it can grow
further, and I wish Charles Hollis and his team well. They have
been great members of the Falanx organisation and will remain our
friends."
"Our resultant simplified corporate structure, combined with our
well-positioned products, growth opportunities and improving
financial performance gives the directors increasing confidence
about the Company's future."
The person responsible for this announcement is Ian Selby,
CFO.
Enquiries:
Falanx Group Limited Via IFC
Alex Hambro, Chairman
Mike Read, CEO
Ian Selby, CFO
Stifel Nicolaus Europe Limited, Nomad and
Broker
Alex Price / Fred Walsh +44 (0) 207 710 7600
IFC Advisory Ltd, Financial PR & IR
Graham Herring / Zach Cohen +44 (0) 203 934 6630
About Falanx
Falanx Group Limited, is a global intelligence and cyber defence
provider working with blue chip and government clients. For more
information: https://www.falanx.com/
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END
DISDKABQNBDDDKK
(END) Dow Jones Newswires
October 06, 2021 09:43 ET (13:43 GMT)
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