Five days shy of the June 30th deadline, the board of directors of AIM listed WIN plc has unanimously recommended that its shareholders accept a cash offer from Hyderabad headquartered Mobile VAS company IMI Mobile (see disclosure below), and also committed their shareholding of 2.34% for purchase. The offer has been made at the previously mentioned price of GBP 1.41 per WIN plc share, valuing WIN at GBP 15.93 million. It’s worth nothing that the offer is conditional on acceptances being received so that IMImobile Europe, the company through which IMI Mobile is looking to acquire WIN plc, will hold more than 50 per cent of voting rights. This would be IMI Mobile’s fourth acquisition, after acquiring music downloads and content marketing service DX3, mobile phone book service Mobyko, and Nokia Siemens Networks”s Music2You service, and probably its largest so far. Remember that WIN’s largest shareholder, ISIS Equity Partners, opposes this deal.

The cash consideration payable by IMImobile Europe will be funded from IMI Mobile’s existing cash resources, bank facilities and a loan to IMImobile Europe from Spark Ventures plc. IMI Mobile had raised $13 million from Sequoia Capital and First Mark Capital late last year, its third round of funding, and acquisitions in the EU and USA have been on the agenda.

Why is WIN plc Selling? Why Is IMI Mobile Buying?

At the end of December 2009, WIN Mobile was debt free, with a turnover of GBP 41.9 million, gross profit of GBP 10.4 million, EBITDA of 2.3 million, gross margin of 24.9%. So why, then, is it selling? In the announcement, WIN says that there is uncertainty over when WIN’s managed services division might be able to benefit from an improvement in market conditions, given that large scale opportunities have significantly longer sales cycles. For scale, it must either acquire or become part of a larger group, to compete for larger managed services contracts, and it has been difficult for it to use its shares to fund suitable acquisitions on acceptable terms, given that it is a publicly traded company. WIN had been previously in discussions for a sale beginning December 2008, but the discussions were terminated in April 2009, when the buyer couldn’t fund the acquisition.

IMI Mobile has declined to respond to repeated requests from MediaNama for details on why they’re acquiring WIN plc. Vishwanath Alluri, CEO of IMI Mobile, when contacted today, said that they’ll revert “at an appropriate time”. On the face of it, this deal appears to be about market entry, especially into the UK market: the offer states that IMI believes that telecom operators in Europe face challenges of price competition, increasing data usage and the need to innovate, and it intends to roll out its platform in Europe. Even through WIN services customers in 20 countries, most of its business appears to be centered around the UK, which is the market that IMI Mobile is eying. Details of WIN’s business here.

IMImobile says that its “platforms and resources should allow WIN to significantly strengthen the service offering to its existing clients and improve profitability by using the group’s Hyderabad-based Network Operations Centre. The IMImobile Directors also believe that there are potential synergies to be gained through cross selling between the businesses to generate additional revenues.”

IMI’s Offer For Acquisition of WIN Plc & Opposition To It

The offer of GBP 1.41 for the acqusition of WIN Plc is around 25.6 times WIN’s basic earnings per share of 5.5p for the year ended 31 December 2009. WIN has estimated that its profit before tax for the six months this year is similar to what was reported for the first six months last year, so stagnation appears to be a concern. The share price of WIN Plc had gone up since the announcement, and GBP 1.41 represents a 19% premium to its last closing price, and a 42.4% premium to the closing price for 29th April, the day that talks between WIN Plc and IMI Mobile were announced.

The offer covers 28.56% of WIN’s existing issued share capital (details here), an additional 29.26 per cent of WIN Shares. IMImobile Europe already owns 2.37% in WIN Plc, while Anu Shah, head of IMIMobile Europe, owns 0.09% in the company. However, there is opposition to the deal: as we had reported earlier, ISIS Equity Partners, WIN’s largest shareholder with 19.01 per cent shares, has said that the bid of GBP 1.41 per share, “would substantially undervalue the Company”, and had encouraged the WIN board not to accept the deal.

Eventually Plans To Delist

The offer document, which you can download here, also states that IMIMobile Europe eventually intends to apply to the London Stock Exchange for the cancellation of the trading of WIN shares on AIM. This is dependent on IMIMobile Europe owning 75 per cent or more of the WIN Shares. WIN will be re-registered as a private company.

* Disclosure: IMI Mobile is a MediaNama sponsor

Related:
WIN’s Largest Shareholder Says IMI Mobile’s Bid Undervalues Co
IMI Mobile In Talks To Acquire UKs WIN Plc At GBP 1.41 Per Share