Invigour Group has signed a $10 million deal for retail e-commerce analytics startup, Sprooki, in a move aimed at giving retailers an antidote to increased competition from new entrants such as Amazon.
The Australian Securities Exchange (ASX)-listed big data company, Invigor Group (ASX:IVO) told shareholders on 27 April that it will acquire Sprooki for a potential total consideration of $10 million through the issue of Invigo shares to the Sprooki vendors.
According to a statement Invigor Group issued on the ASX, the retail industry is seeking to transform in order to grow profitably and remain competitive against new entrants such as Amazon.
As such, the acquisition of Sprooki is said to be a “game changing transaction” that will position Invigor as a key player in the loyalty and data solutions to retail and e-commerce spaces.
Invigor chairman and CEO, Gary Cohen, said the company has already identified multiple opportunities to market the new offering to its customers, and this is expected to deliver revenue-generating opportunities to the combined group.
“With the imminent arrival of Amazon, something that has been much publicised in Australia recently, we have witnessed a surge of interest in data-driven digital solutions that can address loyalty, pricing and shopper behaviour," Cohen said.
“With the Sprooki acquisition, we will now have the necessary range of solutions to provide the antidote that these enterprise and SME customers need to compete more effectively in an increasingly competitive retail environment,” he said.
Following completion, Sprooki co-founders Claire Mula and Michael Gethen will take senior leadership roles at Invigor. Mula will be based in Sydney and will be appointed as chief operating officer and an executive director. Gethen will be based in Singapore and will head up the group’s Asian operations.
Mula said the transaction is a natural progression from its partnership with Invigor, which delivered projects such as the digitisation of Manly Wharf.
“Sprooki and Invigor have complementary products, presence and leadership. Together, we are stronger and aligned to unlock opportunities from existing and new customers and markets,” Mula added.
The deal will see $4 million worth of Invigor shares, based on the volume weighted average price (VWAP), issued in two tranches following transaction completion, which is expected in early June after shareholder approval.
These shares will be subject to a 12-month escrow.
The balance of up to $6 million worth of Invigor shares will be issued in April 2019 at the then VWAP, subject to profit and performance milestones being met for FY17 and FY18.
As part of the deal, investor, Allectus Capital Limited, will invest $1 million in Invigor Group.
The acquisition will also give Invigor a “significantly increased” customer base, a greatly expanded geographical footprint and a product offering to leverage existing customers for further growth.
Invigor said Sprooki is forecast to add more than $2 million of revenue to Invigor in FY18, with an additional $3 million per annum expected to be generated in revenue synergies. Invigor also expects its revenue model to be strengthened and broadened through recurring performance and transaction fees based on customer usage and sales transactions via the platform.
The cost base of the combined business will be streamlined through consolidating shared service functions, back office cost savings and more efficient sales and marketing operations.
The company recently reported a net loss after tax of $6.77 million for the year ending 31 December 2016. The company’s loss doubled from 31 December 2015, of $3.11 million.
At the time of writing, Invigor's shares were trading at $0.02.