Information technology outfit Megaport Ltd (ASX: MP1) has announced a $200 million capital raise and a major acquisition, which will open up a new business front for the company.
The company said on Tuesday that it would buy Latitude.sh, "a global, automated infrastructure platform delivering compute-as-a-service" for US$150 million up front and up to a further US$150 million contingent on revenue and integration targets.
Megaport also stated that it would invest approximately $43 million in expanding its operations in India, with the funds allocated to acquiring a leading network operator with a local team and approximately 400 active customers.
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New capital to fund deals
The deals would be funded by a fully-underwritten $200 million placement to institutional shareholders at a price of $14.30 per share.
Up to another $20 million will be raised via a non-underwritten share purchase plan open to Megaport's retail shareholders, who will be able to subscribe for up to $30,000 worth of new shares at the placement price or a lower price if the shares trade below that.
Megaport also said that it had delivered "strong financial performance" through the first four months of the year, with annual recurring revenue running at $260.1 million for October this year, up 22% compared with the same month last year and first quarter revenue of $62.9 million, up 21% compared to the same period last year.
The company said in its statement to the ASX on Tuesday that the Latitude.sh acquisition was "highly strategic and financially compelling''.
The company added:
Latitude.sh is a globally scalable, high performance software platform that automates infrastructure. It is similar to Megaport and offers customers compute-as-a-service which can be provisioned on demand.
Megaport said it would set up a new "compute as a service" division based around Latititude.sh, giving it exposure to a US$13 billion compute market, which it said was expected to grow at a compound annual rate of 20%.
As the company said:
The market is being supported by customers increasingly seeking to run critical workloads globally, with low latency. Latitude.sh's CPU / GPU capabilities support deployed inference and training workloads closest to users, partners and data centres.
Megaport said Latitude.sh was profitable, with EBITDA margins of about 50%, and was growing its annual recurring revenue at more than 50%.
The acquisition will be funded with US$70 million in cash and about 7.8 million Megaport shares to make up the remaining US$80 million.
The extra US$150 million in contingent payments will be paid in three US$50 million tranches over three years, should the relevant milestones be met.
Megaport will hold its annual general meeting on 25 November. The company's shares remain suspended from trade and last changed hands for $15.30.
