Sinch AB (publ)

Sinch acquires Wavy to accelerate innovation and drive growth in Latin America - Seite 2

After the transaction has closed and won regulatory approval, Wavy CEO Eduardo Henrique will become a member of the Sinch senior management team.

“Wavy is built on passion, innovation and a mission to make an impact on a global scale. Joining forces with Sinch lets us innovate together and truly transform how businesses engage with their customers. We are on a journey that has only just begun and look forward to the combined future of Sinch and Wavy”, comments Eduardo Henrique, Wavy CEO.

Financials and synergies

In the 12 months ending March 31, 2020, Wavy is expected to record revenues of BRL 464 million, Gross Profit of BRL 130 million, and adjusted EBITDA of BRL 48 million. In SEK terms, using today's 2.00 SEK/BRL exchange rate, this corresponds to revenues of SEK 929 million, Gross Profit of SEK 261 million, and adjusted EBITDA of SEK 95 million. The business employs 260 people with 9 offices in 6 countries. In the calendar year 2020, under current trading conditions, gross profit is expected to grow by around 15 percent in local currency.

Synergies from the combination of Sinch and Wavy are expected to reach SEK 30-40 million, or BRL 15-20 million, over the coming 24 months.

Valuation

The purchase price paid by Sinch reflects separate valuation of (i) Wavy’s established SMS business and (ii) Wavy’s fast-growing Innovation business for conversational messaging through WhatsApp.

The SMS business is valued at 8.8x EV/EBITDA, before synergies, based on expected EBITDA for the 12 months ending March 31, 2020.

The Innovation business, which is growing more than 200 percent year-on-year and which operates at a markedly higher gross margin, is valued at 3.4x EV/Sales based on the current run rate (annualized revenues for December 2019-February 2020).

The blended EV/EBITDA multiple for the two parts corresponds to 12.5x, or 9.1x including estimated synergies at full run-rate.

Financing

The acquisition is financed through a combination of cash and debt facilities. Upon closing, Sinch will pay Movile a cash consideration of BRL 355 million and 1,534,582 new Sinch shares, issued through an issue in-kind. This implies that the number of shares in Sinch rises by around 2.8 percent and means that Sinch welcomes Brazil-based Movile as a new key shareholder. The issued shares are subject to customary lock-up undertakings, whereby 50 percent of the shares received may not be divested for 12 months, and the remaining 50 percent may not be divested for 18 months.