The IOUpay Ltd (ASX: IOU) share price is climbing higher after the ASX fintech company emerged from yesterday’s trading halt.
After initially rocketing 22%, the IOUpay share price has given back some of those gains and is currently up 3.23% to 32 cents per share.
Below we look at the company’s acquisition announcement that looks to be driving investor interest.
What acquisition announcement did the company make?
The IOUpay share price is gaining today after the company reported it is acquiring a 42% stake in I.Destinasi Sdn Bhd (IDSB).
IDSB provides long-term installment-based consumer credit services in Malaysia.
IOUpay said IDSB is a complementary business “with prospective collaboration opportunities for cross-selling” between its short-term buy now, pay later offerings (which run up to 6 months) and IDSB’s longer-term consumer loan products, which run up to 10 years.
According to the release, IDSB “holds a unique and highly valuable AG Code2 licence”. This provides it with a significant competitive advantage in Malaysia consumer credit market. There are only 2 companies holding an AG Code2 licence in the country.
IOUpay will pay RM126 million (AU$41.3 million) for its 42% stake in 2 tranches over a 6-month period. It said that price won’t be increased “if IDSB outperforms an audited profit before tax” for the 2021 financial year.
On the other hand, the purchase price could be decreased if the profit before tax is less than RM30 million (AU$9.8 million) for FY21.
IOUpay will fund the acquisition with a 50% upfront cash consideration from its current cash holdings. The remaining 50% is scheduled to be paid in 6 months. The company said it will assess the appropriate payment method closer to that time.
IOUpay share price snapshot
Over the past 12 months, the IOUpay share price has rocketed 550%. This far outpaces the 27% gains posted by the All Ordinaries Index (ASX: XAO) over that same time.
IOUpay’s shares are up 30% over the last month.