Why the FINEOS (ASX:FCL) share price is edging lower today

The FINEOS Corporation Holdings PLC (ASX: FCL) share price is retreating today following the company’s acquisition announcement. Here’s the latest.

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The FINEOS Corporation Holdings PLC (ASX: FCL) share price is retreating today following the company’s acquisition announcement.

During early afternoon trade, the insurance software company’s shares are exchanging hands for $3.89, down 2.2%. In comparison, the All Ordinaries Index (ASX: XAO) is sitting at 7,364 points, up 0.6% for the day.

FINEOS moves to takeover Spraoi

Investors appear unfazed by the latest announcement by FINEOS, sending its shares lower for the day.

According to its release, FINEOS advised it has entered into a binding agreement with DigIn Technologies LLC (Spraoi) to acquire 100% of Spraoi’s issued securities.

Founded in 2017, Spraoi is a leading United States-based company that provides machine learning capabilities for the Employee Benefits and Life industry. The business has 8 clients and generated revenues of US$6 million in the last calendar year.

The transaction will involve an upfront cash payment of US$4 million, and an earnout of up to US$6.6 million over a 3-year period. This is provided that certain revenue targets are achieved within the timeframe. FINEOS will use its existing cash reserves to fund the deal, along with 700,000 share options issued to Spraoi. Once the acquisition is complete, FINEOS anticipates the Spraoi business to be earnings accretive after its first full year.

FINEOS highlighted that Spraoi’s products and services are a strategic addition to its current offering. The company foresees immediate opportunities arising through enhancing its machine learning platform capabilities, FINEOS Engage and FINEOS Insight.

Michael Kelly, CEO of FINEOS commented:

The North American employee benefits industry is undergoing tremendous change, which is continually accelerating due to the competitive and regulatory environment, as well as the constant advancement of technology capabilities.

…That combination makes Spraoi a natural addition to the FINEOS team as we continually improve the FINEOS Platform to meet the needs of our clients.

The deal is expected to be completed in the near future subject to customary closing conditions, with integration occurring over the next few months.

About the FINEOS share price

The last 12 months have been positive for FINEOS investors, with its shares posting a 27% increase. Year-to-date performance, however, is a little milder with a modest gain of 5%.

The FINEOS share price reached an all-time high of $5.75 in August 2020, before profit-taking led to its downfall.

Based on today’s current price, FINEOS commands a market capitalisation of around $1.1 billion, with roughly 301 million shares outstanding.

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Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia has recommended FINEOS Holdings plc. 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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