Mergers, Acquisitions and Financial Results

South African-born technology company iTouch is being bought out for €141m by Italian digital entertainment specialist Buongiorno. iTouch was formed in Cape Town in 1995 and started out by developing SMS services and interactive voice response technologies. The company now has branches in 13 countries, selling its mobile entertainment products and services to operators in 23 countries.

The company listed on the London Stock Exchange in 2000, but hit financial difficulties in 2001 and 2002 and clocked up operating losses. It delisted in June 2005, through an acquisition by For-side.com in Japan for £184m. It is now privately owned after a management buyout in February this year.

The company’s current investors are its managers, alongside Oak Investment Partners with 40% and Goldman Sachs with 20%. Buongiorno supplies services for wireless and fixed-line consumers and is a dominant player in Europe and the US. It also has operations in Latin America, the Middle East and Africa.

Buongiorno will pay €129m to iTouch shareholders in a combination of €73,7m cash and the issue of 15,4- million new shares, giving the iTouch managers a direct stake in Buongiorno. The shares will represent 14,5% of Buongiorno’s business. Buongiorno will also absorb the €12m debt that iTouch has accrued. It will borrow €115m from Banca IMI to fund the deal, which is subject to approval by its shareholders.

iTouch CEO and co-founder Wayne Pitout said the market for mobile value-added services held major opportunities, but required the players to have a formidable size and global scale. The combined company should benefit from lower running costs and the scale to achieve a tangible improvement in profit margins. The deal would also reduce the business risk that iTouch faced as a solo entity by improving its geographic reach and delivery channels.

After the acquisition, Buongiorno will have more than 1100 staff delivering services in more than 40 countries. That will make it the world’s largest provider of mobile entertainment, information, messaging and marketing services. Last year, their combined revenues stood at €318m with earnings before interest, tax, depreciation and amortisation of €39m.

The acquisition of iTouch was an important step in Buongiorno’s strategy to build a global organisation, said its founder and chairman, Mauro del Rio.

Its global presence, wide product range and various delivery channels would put the combined entity in a very strong position to benefit from the significant growth that was expected for mobile value-added services, he said.

“The combination of Buongiorno and iTouch creates the undisputed number one player in the mobile entertainment market worldwide,” said Buongiorno CEO Andrea Casalini. “More than 1100 strong professionals will now become one team and will be able to align their skills, creativity and passion behind a common goal of bringing digital entertainment experiences to 1-billion people worldwide by 2012,” Casalini said .

(SOURCE: Business Day)