Crossword Cybersecurity Plc Announces The Acquisition Of Stega UK Limited

Crossword Cybersecurity Plc (Crossword), the technology commercialization company that is focused on cyber security and risk management, is pleased to announce, subsequent to its oversubscribed 5.0 million pounds fundraising, the acquisition of the whole of the share capital of Stega UK Limited (Stega), the threat intelligence and monitoring company, referred to in Crossword’s announcement of 28 July 2021, has completed the transaction.

Stega acquisition

The Stega acquisition offers Crossword the additional capability of threat intelligence and monitoring services, using its sophisticated in-house platform. It will bring circa 30 new clients to Crossword, primarily financial sector organizations, taking the total number of fee-paying consulting clients to over 100. 

The target company is currently break-even on an annualized basis, with 605,000 pounds revenue in its most recent full financial year ended 30 November 2020, 75% of which was recurring revenue. Stega had net assets of 49,667 pounds at that date. Cross sell opportunities are being explored with the Stega’s management, alongside operating synergies.

Transaction costs

Crossword Cybersecurity Plc has agreed to pay a total consideration of up to 1.8 million pounds for Stega.

The payments of the transaction are structured as follows:

• An initial payment of 760,000 pounds in cash, payable in three tranches - 600,000 pounds on completion, 80,000 pounds on the first anniversary of completion and 80,000 pounds after eighteen months following completion;
• An initial payment of 200,000 pounds in company shares, issued in three tranches - 100,000 pounds on completion, 50,000 pounds on the first anniversary of completion and 50,000 pounds after eighteen months following completion;
• On the first anniversary of the transaction, up to 295,000 pounds cash and 125,000 pounds in company shares, payable on achievement of a revenue growth target of 24%, during the 12 months following completion of the transaction, compared with revenue in the most recent annual accounts, with lesser payments for achievement of 50% and 75% of the growth target;
• Eighteen months following completion of the transaction, up to295,000 pounds cash and 125,000 pounds in company shares payable on achievement of a growth target of 24% for revenue on an annualized basis, during the six months following the first anniversary of completion of the transaction (so for the period 12-18 months following the transaction completion), compared with revenue in the most recent annual accounts, with lesser payments for achievement of 50% and 75% of the growth target, and
• All shares will be issued at a price based on the average mid-market price for the three months prior to the date of issue.

Issue of Ordinary Shares

Stega was established in November 2016 and has been run by its Chief Executive Officer (CEO), Phil Ashley, since its formation

Stega was established in November 2016 and has been run by its Chief Executive Officer (CEO), Phil Ashley, since its formation. Phil Ashley and his team will join Crossword Cybersecurity Plc and work alongside the company’s consulting team.

Crossword will issue the vendors 242,016 Ordinary Shares of 0.5p each at a price of 41.32p per share, in consideration of the initial payment of shares worth 100,000 pounds. Application has been made for the admission of the 242,016 Ordinary Shares to trading on AIM (Admission), with Admission expected to take place on or around 11 August 2021.

Total Voting Rights

For the purposes of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules (DTRs), following Admission, Crossword will have 74,951,310 Ordinary Shares in issue with voting rights attached. Crossword holds no shares in treasury.

This figure of 74,951,310 shares may be used by shareholders in the company, as the denominator for the calculations, by which they will determine if they are required to notify their interest in, or a change to their interest in the company, under the DTRs.

Threat intelligence and monitoring services

Tom Ilube, CEO of Crossword Cybersecurity plc, commented “Following our successful fundraise last week, I am pleased to welcome Phil Ashley and his team at Stega, to Crossword. Stega’s threat intelligence and monitoring services are a great addition to Crossword’s range of services that help to reduce cyber risks for our clients. Stega, Crossword’s second acquisition of 2021, will be an important part of our plans for continuing revenue growth.”

Phil Ashley, CEO of Stega UK Limited, commented “Stega is delighted to become part of Crossword at this exciting time. We are looking forward to offering our services to a wider customer base and using Crossword’s solid structure, strong connections and determined sales team to drive revenue growth.”