£34.8m reverse takeover
New CEO for Castle Street as deal sealed for IT company
Scottish entrepreneur Bill Dobbie has completed the acquisition of an IT solutions and cloud services business through Edinburgh-based Castle Street Investments. It has agreed to acquire Selection Services Investments for £34.8 million.
Castle Street was created out of the remnants of online dating company Cupid as an acquisitions vehicle and has raised £30m in an oversubscribed placing of shares.
The Aim-quoted company announced before Christmas that it was in talks in what constitutes a reverse takeover and its shares were suspended pending completion of the deal.
MXC Capital initiated the deal and is acting as cornerstone investor, subscribing for £12.9m of equity in exchange for 24.9% of the company. Its partner, Andy Ross, will be the chief executive of Castle Street.
Selection is an established business with £35m of revenues, 65% of which are recurring. It has more than 500 active customers and will have cash resources of £16.5m.
Terms agreed for a £7m revolving credit facility and a £2m overdraft, with up to £10m available.
Mr Dobbie (pictured) said: “It has been our stated investment strategy to seek investment into a profitable and cash generative business with an experienced management team, good revenue visibility and growth opportunities. We believe that in Selection we have identified a business that meets these criteria and look forward to an exciting future.”
Mr Ross said: “The smaller end of the IT services sector is highly fragmented providing an exceptional opportunity for a buy-and-build platform focusing on IT solutions and Cloud services. The combination of a strong balance sheet, the new management team we are building and MXC’s proven track record in the sector is a powerful one that will set us apart and presents a great opportunity to deliver value for shareholders.”