Pareteum Corporation and iPass, Inc. today announced that they have entered into a deﬁnitive agreement under which Pareteum will acquire iPass in an all-stock transaction whereby iPass shareholders will receive 1.17 shares of Pareteum common stock in an exchange offer.
Pareteum says the deal will be immediately accretive to EPS and free cash flow after synergies (it expects more than $15M in annual cost synergies, with more than $12M of those to be realized in the first full combined quarter).
It also sees about $2M in GAAP earnings accretion, $5.5M non-GAAP, in the first full year after closing.
With this accretive acquisition, Pareteum expects to gain a strategic position with new marquee brands and new markets including the enterprise, airline, hospitality, retail and internet of things (IoT) sectors. Pareteum expects to strengthen its established intellectual property portfolio with the addition of over 40 U.S. and international patents.
With more than 500 expected new customers and a global network of over 68 million Wi-Fi hot spots, coupled with proven connection management technology, location services and Wi-Fi performance data, Pareteum is now poised to take its global communications software solutions to every market vertical.
Founder, Executive Chairman and Principal Executive Officer of Pareteum Hal Turner said,
“iPass and Pareteum will now accelerate as one company with combined products and services, the expansion of addressable markets and the resulting executive and operating talent. It has been a pleasure to work with iPass President and CEO Gary Griffiths to combine our companies and execute on a shared vision for growth.”
Pareteum President Denis McCarthy, who is leading the acquisition said,
“Pareteum has enjoyed a solid partnership with iPass over the past year and our mutual view on connectivity and mobile enablement made it easy to see that we could grow our business and accelerate our mission together,”
“Our integration with iPass extends not only Pareteum’s customer base, but also our portfolio of services. Customers will now be able to use the Pareteum Global Software Defined Cloud to access premium wireless and Wi-Fi services, and experience location data analytics for a truly immersive experience.”
The transaction is expected to be immediately accretive to Pareteum’s non-GAAP EPS and free cash ﬂow after anticipated synergies. Pareteum anticipates achieving more than $15 million in annual cost synergies with greater than $12 million of those expected to be realized in the ﬁrst full quarter of combined operations.
Pareteum currently estimates approximately $2.0 million of GAAP earnings accretion and $5.5 million of non-GAAP earnings accretion in the ﬁrst full year after closing the transaction. In addition, the acquisition will add new offices and talent in Silicon Valley, California and Bangalore, India, expanding Pareteum’s presence globally.
Under the terms of the deﬁnitive acquisition agreement, a wholly-owned subsidiary of Pareteum will commence an exchange offer to acquire all of the outstanding shares of iPass common stock, offering 1.17 shares of Pareteum common stock in exchange for each share of iPass common stock tendered.
Upon satisfaction of the conditions to the exchange offer, and after the shares tendered in the exchange oﬀer are accepted for payment, the agreement provides for the parties to effect, as promptly as practicable, a merger, which would not require a vote by iPass stockholders, and which would result in each share of iPass common stock not tendered in the exchange offer being converted into the right to receive 1.17 shares of Pareteum common stock.
The exchange offer is subject to customary conditions, including the tender of at least a majority of the outstanding shares of iPass common stock and certain regulatory approvals, and is expected to close in the ﬁrst quarter of calendar year 2019. No approval of the stockholders of Pareteum is required in connection with the proposed transaction.
Terms of the agreement were approved by the board of directors for both Pareteum and iPass.