IT services firm proposes £6.1m acquisition and change of name

Daresbury-based IT services provider Adept4 announced the proposed acquisition today of CloudCoCo, through the issue of 218.16 million new ordinary shares, worth £6.1m.

CloudCoCo is a cloud, IT hardware, and IT services company based in Leeds.

Adept4 will hold a shareholders’ meeting on October 21, to ask for approval for the acquisition and a change of name to CloudCoCo Group for the enlarged business.

The company also announced changes to its debt refinancing agreement, and plans to make Andy Mills, current chairman of CloudCoCo, Adep4 chif executive.

Regarding the debt refinancing agreement, the company said BGF has agreed that £1.5m of the loan notes currently held by it will be cancelled and the remaining £3.5m loan notes will be purchased by MXCG – a wholly owned subsidiary of MXC Capital Limited – and their terms revised.

MXCG supported CloudCoCo by an initial investment of £100,000 for a 10.6% shareholding.

Shortly before the company entered into the acquisition agreement, MXCG sold this shareholding to Andy Mills, who it is proposed will become chief executive of the enlarged group on completion.

Simon Duckworth, Adept4 non-executive chairman, said: “We are delighted that, conditional on shareholder approval, we have agreed to acquire CloudCoCo.

“We are proposing to acquire a business which has expanded rapidly since establishment and, by harnessing CloudCoCo’s proven and experienced salesforce with our existing operations, we believe that there is a clearly defined opportunity to return Adept4 to growth.

“We have also reached agreement, subject to completion of the acquisition, to revise the terms and reduce the level of the group’s indebtedness. We view these proposals as positive developments as we seek to recover value for our shareholders.”

Explaining the reason for the proposed takeover, Adept4 said today: “The company has been challenged by the general level of economic uncertainty in the market coupled with the investments made in a new sales team during the previous financial year not delivering the results the board had expected.

“Continued delays in new sales in the current financial year led to the group experiencing monthly trading group EBITDA and cash losses.

“As a result, and in order to protect the cash reserves of the group whilst the board considered the strategic options available to the company, the decision was taken to focus on the group’s existing customer base with less emphasis on new business acquisition.

“Whilst this has led to reduced revenue and gross profit, it requires a significantly lower operating cost base and, therefore, a cost reduction programme was implemented which completed in March 2019.”

It added: “The performance of the group was further affected by the loss, in April 2019, of a customer contract which generated £700,000 of revenue in the year ended 30 September 2018.

“The combined effect of these changes mean that the group has returned to modest levels of monthly trading group EBITDA profit generation and the monthly net cash outflows, after plc costs and debt service costs, have reduced.

“The company has, over recent months, explored several strategic options including the proposed acquisition which, the board has concluded, represents the best opportunity to return to growth and generate long-term value for all stakeholders.”