April 25, 2016
TIO Networks closes acquisition of Softgate Systems
VANCOUVER--TIO Networks Corp, a major North American cloud-based bill payment processor, closed of the previously announced acquisition of Softgate Systems, Inc., the New Jersey corporation and a leading provider of consumer retail bill payment solutions.
Inclusive of its newly acquired subsidiary, TIO will become the largest provider of walk-in bill payment services in North America. TIO will also be one of the leading providers of payment processing and receivables management to national and regional utility, wireless, and cable bill issuers across North America.
"The acquisition of Softgate provides a unique opportunity for TIO to scale its business substantially and represents an important corporate milestone as we continue to grow and evolve to meet the needs of our customers," said Hamed Shahbazi, CEO of TIO Networks. "TIO has enjoyed an eight year relationship with Softgate, and with our cultural and commercial alignment an acquisition felt like a natural progression for our businesses. We expect to be able to expand and extend services towards our customer base across North America, with a strong focus on servicing the underbanked and unbanked population."
On a pro-forma basis the combined companies generated trailing 12-month revenues of more than CAD$105 million. The two companies (inclusive of other TIO subsidiaries), also processed approximately 80 million consumer transactions in the last 12 months, worth over USD$9 billion. As noted in our July 2015 announcement, TIO expects that the addition of Softgate will add more than USD$5 million in incremental EBITDA per year. Softgate also provides TIO with USD$30 million in Net Operating Losses, which TIO expects to use to reduce its taxable income over the next 16 years.
"Softgate is excited to join forces with TIO and to create an emerging competitor in the multi-channel bill payment marketplace," said Rick Auletta, CEO of Softgate. "This acquisition will be beneficial for our current and future customers, providing an increased level of service between the two companies. Both TIO and Softgate possess complementary products and distribution channels in the bill payment industry, and together we can provide a level of service second to none."
As previously announced on July 14, 2015, the consideration for the acquisition included the issuance of 25,000,000 shares to Softgate shareholders, the issuance of an aggregate of USD$4,128,103 in vendor take back promissory notes and the payment in cash of USD$4,617,488.
In connection with the transaction, TIO has secured a term loan through Silicon Valley Bank for USD$5.7 million. The loan is repayable over 5 years at an interest rate of prime + 1.5%.
"We're excited to be partnering with TIO to help finance its growth, and we look forward to a long relationship with the company," said Minh Le, Market Manager serving Washington and Western Canada for Silicon Valley Bank. "We aim to give innovative companies like TIO the financial tools they need at each stage of their development and corporate growth."
As previously announced, as a result of this transaction, Steve Piaker of Napier Park Global Capital and Joe Allegra of Edison Partners will join, and Brett Baris of InterAtlantic Group will step down from TIO's Board of Directors. "We thank Brett for all his service and support to TIO's Board and are pleased to welcome Joe and Steve," said Hamed Shahbazi.
TIO Networks is a cloud-based multi-channel bill payment processing and receivables management provider, serving the largest telecom, wireless, cable, and utility bill issuers in North America. TIO integrates with the back office of billing systems to accept, validate, and collect payments outside of the traditional bank channel, via self-service kiosk, retail walk-in, mobile, and web solutions. With over 66,000 endpoints in its processing network, TIO symbolizes fast, convenient, and secure access to expedited bill payment services.
Softgate provides reliable walk-in bill payment, domestic and international prepaid wireless, prepaid long distance, international top-ups and international bill payments through their PayXchange service. Established in 1993, Softgate connects world-class service providers and consumers through one of the largest networks of independent retail-based payment centers in the US.