Australis Capital (AUSA.C) recent merger with Passport Technology unpopular with shareholders

shareholders
06/29/2020

Australis Capital (AUSA.C) acquired Passport Technology on Thursday, a deal which if approved will mean immediate profitability and revenue for the company.

The company believes that acquisition of Passport Technology and the expected growth of AUSA’s Cocoon Technology and Paytron Merchant Services will combine to make the company EBITDA positive in 2021.

“The Passport Acquisition enhances the Company’s ability to drive growing and sustainable value creation for all shareholders. We’re pleased with the early, overwhelmingly supportive inbound comments we have received from shareholders since we announced the Passport Acquisition and look forward to its successful completion,” said Cleve Tzung, chief executive officer of AUSA.

Passport Technology brings gaming licenses to the table, and also provides payment options through unattended kiosks, and like Cocoon Technology, operates in a highly regulated environment, boasting a high barrier for new market participants to cross to get into the market. The company believes this acquisition to be accretive immediately.

The global market for this variety of fintech service is anticipated to pass $46 billion by 2026.

The deal will include the exchange of $9,600,000 in cash, as well as 58,651,552 of AUSA common shares worth $12,200,000. Also $3 million from AUSA’s holdings of shares in Body and Mind (BAMM.C) and $6.6 million in real property. Benchmarks include that if the company makes $7 million in revenue in 2020, Passport’s shareholders will get $2 million shares of both AUSA and BaM. If the company makes $8 million, they will get an extra $2 million. Furthermore, as long as EBITDA for 2021 is above $3 million, Passport’s shareholders will receive 25% of the revenue in excess of $7 million for 2021.

The acquisition was not popular with shareholders, who took to Twitter to voice their concerns:Agreed. It isn’t in the interest of shareholders. Acquisition is costly and is not attractive to shareholder value. Our concerns were also addressed. We were also promised no more dilution & they told us they didn’t need the private placement but it was an option $ausa $AUSAF https://t.co/HpBRB6B8K5

Roger Swainson, the chairman of the independent committee responded with this:

“With the assistance of our external legal and financial advisors, the Independent Committee has at all times been solely focused on what is in the best interests of the Company and all of its shareholders. While we welcome constructive input and critique from the shareholders whose interests we steadfastly represent, the transaction process we have employed is beyond reproach. Any suggestion otherwise is baseless.”

—Joseph Morton

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