Faritec has acquired Ubusha Technologies for R26-million, and announced a R100-million programme for funding further growth and acquisitions.
The Ubusha acquisition is with effect from the 1 March 2008, paying R23-million in cash and issuing Faritec shares to the value of R3-million.
The move is the first in a planned growth phase by the company, which has entered into a long-term debtors securitisation funding programme in terms of which it has raised R100-million from investors in the Capital Markets at fixed rates for an initial period of five years.
Simon Tomlinson, CEO of Faritec, says that by bringing Ubusha into the Faritec stable, the company has effectively leapfrogged its entry into the specialised identity and access management arena.
"The combination of traditional security information and event management with identity and access management will position Faritec as the leading provider of managed security and identity solutions," he says. "In addition, the identity and access management competency of Ubusha compliments the Google solution offering."
Ubusha is the leading provider of Novell identity and access management solutions to the financial, telecommunications and public sector markets, and boasts annual revenues of R22-million in the services and solutions space. The company has grown its business by 55% over the past year and has an operating profit margin in excess of 25%. Had this business been incorporated for the six months ending December 2007, it would have increased Faritec's operating profit by 12%.
As a part of the, transaction Faritec will also acquire a 30% stake in Linux System Dynamics, a leading player in the Linux and Open source software (OSS) services space.
According to Logan Hill, business unit manager: Security and Availability Solutions at Faritec, the acquisition will bolster the Faritec security offering and create one of the most comprehensive client reference lists in the provisioning of identity and access management solutions in the South African market.
Ubusha's team of 22 sales and solutions staff will be integrated into Faritec's Security division as an identity and access management consulting competency within the company's existing security structure. Marius Agenbag, MD of Ubusha, and his immediate management team will join Faritec's Security management team.
Regarding the R100-million in funding, Tomlinson says the company's board has taken a strategic decision to refinance its current short term debt facilities with longer-term secured finance by issuing zaAA rated debentures to investors in the Capital Markets on the strength of its debtors book that features a diversified portfolio of prominent blue chip clients;
"Having grown our revenue organically and through acquisition from R530-million in 2006 to more than R1-billion in 2008, our monthly revenue run rate has increased from R44-million to approximately R100-million per month without a corresponding increase in credit facilities from our bankers, something that is now starting to place strain on our working capital and trade credit facilities," says Tomlinson.
He adds that, in addition to the credit facilities provided by the company's bankers, Faritec has been using expensive trade finance from their suppliers in the last year to assist with the management of working capital and trade credit facilities.
"As the Class A debentures bear interest at a fixed rate of 12,73 % nacq and the funding raised has largely replaced our short term banking and working capital facilities that bear interest in excess of the prime rate, this transaction will have a direct and extremely beneficial impact on our bottom line," he says.
According to Tomlinson, Faritec expects to continue to grow in the future, both organically and through acquisition and requires stable funding at competitive rates to fund this anticipated growth. The securitisation transaction allows the company access to stable funding at competitive rates over the next five years.