KUALA LUMPUR (April 29): Catcha Digital Bhd (KL:CATCHA) said a slew of acquisitions announced were only finalised recently after being in the works for over the past two years.
"We got out of [GN2 status and as] our financials improved, we were able to do all these deals," Catcha Digital chief executive officer Eric Tan Leong Yit said during an investors briefing. “Many of them had to be deferred until recently.”
Tan was responding to a question from the floor about the rush of acquisitions after the digital media and software firm exited Guidance Note 2 (GN2).
Catcha Digital exited GN2 status — a designation for cash companies that lack a substantial operating business in July 2023 — after acquiring iMedia Asia for RM43.92 million in cash and shares.
In the past six months, Catcha Digital has announced six acquisitions totaling RM130.37 million, including a 60% stake in Framemotion Studio Sdn Bhd for RM37.32 million and 92.5% in Theta Service Partner Sdn Bhd for RM35.0 million.
Each acquisition incorporates a profit or performance guarantee mechanism spanning 24 to 48 months. The agreements include earn-out provisions, requiring the sellers to meet certain profit targets for payouts from the acquisitions.
On Monday, Catcha Digital proposed a one-for-four rights issue aiming to raise a maximum of RM25.23 million, to partially fund some of the acquisitions.
The rights issue is expected to be priced at up to a 20% discount to the prevailing theoretical ex-all price, with final pricing expected in one to two months, Tan said.
He noted that the funds raised from the rights issue will cover obligations for the next 12 to 18 months, while future cash flows are expected to be partially supported by revenue generated from the acquired businesses.
A private placement that aims to raise RM10.09 million, meanwhile, serves as a contingency measure in case the rights issue does not proceed as planned under the maximum scenario, Tan added.
The rights issue involves major shareholders Catcha Investments Ltd and Catcha Group Pte Ltd together committing to a minimum of about RM11.5 million, an arrangement that Tan said seems “odd” but necessary to comply with the creeping threshold.
"If you hold a 33% stake in the company, you can only acquire an additional 2% every six months without triggering the takeover mandate," he explained.
For now, the company has no plans to issue dividends, opting instead to reinvest its earnings to fuel further business growth, he said.
When asked why the acquisitions were funded with cash instead of shares, Tan said it is tough to properly align incentives post-acquisition since Catcha Digital is not fully acquiring the businesses.
Additionally, issuing shares would result in dilution for existing shareholders, he added.
Shares of Catcha Digital were unchanged at 28.5 sen as of midday break, giving the company a market capitalisation to RM102.7 million. Year-to-date, the stock has fallen nearly 23%.