Sinch AB (publ)

Sinch expands to India through acquisition of ACL Mobile - Seite 2

“Together with Sinch we are scaling up to become one of the leading global players in our industry. I’m excited about this next chapter and the many new opportunities that we can pursue together”, comments Sanjay K Goyal, Founder and CEO of ACL Mobile.

Financials and synergies

The acquisition of ACL Mobile significantly increases Sinch’s global scale and overall messaging volumes.

In the 12 months ending March 2020, ACL Mobile delivered 47 billion messages on behalf of its enterprise customers. During this period, the company recorded revenues of INR 4,959 million, gross profit of INR 1,091 million, and Adjusted EBITDA of INR 480 million. In Swedish krona, using the current 8.17 INR/SEK exchange rate, this corresponds to revenues of SEK 607 million, gross profit of SEK 134 million, and Adjusted EBITDA of SEK 59 million.

Like-for-like gross profit growth in the 12 months ending March 2020 was 13 percent. Although the long-term growth outlook is favorable, lower commercial activity in India due to the Covid-19 pandemic means that the near-term growth outlook is less predictable.

Initial integration costs are estimated at SEK 17 million. Total synergies from the combination of Sinch, ACL Mobile and SAP Digital Interconnect will be assessed upon closing of the two transactions.

Valuation

The total price paid by Sinch implies an EV/EBITDA-multiple of 11.1x based on adjusted EBITDA for the 12-month period ending March 2020.

Financing

The acquisition of ACL Mobile is financed using Sinch’s cash at hand and available credit facilities. The total price paid is INR 5,350 million, which corresponds to SEK 655 million at the current exchange rate.

The transaction is structured in two tranches. When the transaction closes, Sinch initially acquires 82 percent of the outstanding shares in ACL Mobile. At this time, Sinch is also granted a call option to acquire the remaining 18 percent of ACL Mobile on or after December 1, 2020. The Seller has a corresponding put-option in the event Sinch does not exercise the call option.

Sinch has a financial target to maintain net debt/adjusted EBITDA below 2.5x over time. As of Q1 2020, net debt/adjusted EBITDA was -1.0x when measured on a rolling, twelve-month basis. Beyond the acquisition of ACL Mobile, several recently announced transactions will affect this ratio in coming periods:

• On April 1, Sinch closed the acquisition of Chatlayer for a total cash consideration of EUR 6.9 million. This corresponds to SEK 73 million at the current exchange rate.
• On March 26, Sinch announced the acquisition of Wavy for a cash consideration of BRL 355 million and 1,534,582 new shares in Sinch. The cash component corresponds to SEK 663 million at the current exchange rate. The transaction is subject to regulatory approval and is expected to close in H2 2020.
• On May 5, Sinch announced the acquisition of SAP Digital Interconnect (“SDI”) for a total cash consideration of EUR 225 million. This corresponds to SEK 2,366 million at the current exchange rate. The transaction is subject to regulatory approval and is expected to close in H2 2020.

Assuming that the acquisitions of Chatlayer, Wavy, SDI and ACL Mobile had already been completed in Q1 2020, proforma net debt/adjusted EBITDA would have been 3.2x. This calculation includes Adjusted EBITDA in all acquired entities over the past 12 months. Whereas 3.2x momentarily exceeds Sinch’s targeted 2.5x, continued earnings growth and underlying cash generation means that the ratio is expected to decline over coming periods.