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Why the K2fly (ASX:K2F) share price is climbing today

The last piece of the jigsaw being fitted, indicating good news for a share price on merger or acquisition
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The K2fly Ltd (ASX: K2F) share price is lifting today on news the asset management consulting service will acquire Decipher’s mining solutions business.

The K2fly share price opened at an intraday high of 36.5 cents then plummeted to a low of 34 cents. However, its shares are climbing again in afternoon trade, now up 1.47% to 34.5 cents at the time of writing.

What’s driving the K2fly share price higher?

The K2fly share price is climbing higher after reporting a takeover of Decipher to enhance its suite of solution offerings.

Decipher is a software-as-a-service company developed and operated by CSBP Limited (CSBP), and Wesfarmers Chemicals, Energy & Fertilisers Limited (WesCEF). Decipher offers a cloud-based platform that helps manage a company’s resources to be more sustainable and profitable.

In its announcement, K2fly advised that it has executed a business sale agreement to acquire the assets of the ‘Decipher for Mining’ business from CSBP and WesCEF.

As part of the agreement, Decipher CEO Anthony Walker will join K2fly in a senior executive position along with the core Decipher team. It’s expected that the new inclusions will bring added expertise to K2fly’s software solution suite.

Terms of the deal

Under the agreement, K2fly will issue 11,366,691 ordinary shares worth $3.7 million to Westfarmer’s subsidiary, CSBP. This will account a holding of 10.13% interest in K2fly upon completion of the transaction, making CSBP its largest shareholder.

In addition, up to 5,345,633 performance shares can be further issued if performance targets be met. Should this occur, CSBP’s stake in K2fly will increase to 14.22%, pending the conversion of performance shares to ordinary shares.

Both classes of shares will be subject to voluntary escrow periods for 2 years.

The company said it will send out a notice of the meeting to all shareholders in the near-term future. K2fly is seeking shareholder support to approve the acquisition which will be held around the middle of March. If successful, it’s estimated that completion of the acquisition would occur within a short time after.

Management commentary

Commenting on the acquisition, K2fly chief commercial officer Nic Pollock said:

We have been partnered with Decipher for nearly a year now and we have found many synergies in our joint offering, go to market capabilities, and operational models that the acquisition was a logical combination.

We are both lean start-up companies and there is virtually no duplication and many upsides to the deal. We are pleased that Anthony Walker, the Decipher CEO, will be joining K2fly in a senior executive position as well as the core Decipher team.

Decipher CEO Anthony Walker went on to add:

We have formed a very close working relationship with the K2fly team, and we all share a passion for delivering better ESG (environmental, social and governance) monitoring and compliance outcomes to the mining industry and the communities in which they operate. This transaction will dramatically increase our pace of delivery on these aspirations.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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