In a bold move that is set to reshape the landscape of tTech Limited, Simply Secure Limited has upped its stake in the Junior Market-listed technology company to nearly 70%, triggering a mandatory takeover offer to the remaining shareholders. This development marks a decisive step in Simply Secure’s strategic bid to dominate the IT consultancy market in the Caribbean.
On Friday, Simply Secure, a St. Lucian International Business Company (IBC), acquired an additional 20% of tTech’s ordinary shares, increasing its ownership to 69.08%. The company spent a hefty sum of $45.95 million (USD$300,000) for the purchase of 21.2 million shares, bringing its total holdings to 73.2 million. The shares were sourced from two key shareholders—Enqueue Inc., owned by former tTech CEO Norman Abraham Chen, and Auctus Holdings Inc., under the ownership of Gordon Christopher Reckord, another former CEO of tTech.
Chen and Reckord, who have both stepped down from the tTech board, played pivotal roles in the company’s early years, and their departure signals a major shift in tTech’s direction. Edward “Teddy” Alexander, chairman of tTech, expressed gratitude for their leadership, noting that their efforts laid the foundation for the company’s growth, but he emphasized that Simply Secure’s new leadership was now positioned to accelerate that growth.
The deal represents a continuation of Simply Secure’s aggressive strategy in the tech space. Earlier this year, Simply Secure made its first major acquisition, purchasing 49% of tTech’s shares for $160.37 million. The latest move is expected to give Simply Secure not just control but the ability to influence tTech’s strategic direction fully.
A Mandatory Takeover Offer
With this acquisition, Simply Secure has now crossed the 50% threshold of voting shares, triggering the mandatory takeover rules under the Jamaica Stock Exchange (JSE). The company is required to make a formal offer to buy out the remaining shares in tTech from its existing shareholders, with the offer price set at the same rate for all shareholders.
This move is not unusual for companies aiming to take control of publicly listed firms, but it comes with several intricacies. The offer must be extended within 30 days of November 15, 2024, the date on which Simply Secure became the majority shareholder. Additionally, Simply Secure must disclose the details of its funding for the takeover in a bid circular, including an expert opinion and a directors’ recommendation.
While Simply Secure is poised to acquire the remaining shares, there is a strategic limit to the percentage it can own. The JSE’s rules require a minimum of 100 shareholders, holding at least 20% of the company’s stock, for tTech to maintain its listing on the exchange. This means Simply Secure is likely to acquire no more than 11.5 million shares in the final stage of the offer to ensure tTech stays publicly traded.
Restructuring Efforts at tTech
Since Simply Secure’s first purchase in July, tTech has been undergoing significant internal restructuring aimed at improving efficiency and maximizing growth potential. This has included merging operations with Simply Secure LLC, eliminating redundancies, and integrating support functions. Despite these changes, the financial impact has been a mixed bag. While some improvements are expected in the long term, tTech has faced increased operating expenses—up 44% in the third quarter alone—which has led to a swing from profitability to a loss.
Third-quarter net losses totaled $5.9 million, compared to a net profit of $5.8 million in the same period the previous year. The company’s revenue for the year also dipped by 5%, resulting in a $75,000 net loss, compared to a $18.6 million profit in 2023.
Market Performance and Investor Reactions
Despite these financial setbacks, tTech’s stock price saw a 15% surge following news of the latest stake acquisition. The stock rose to $2.53 per share, bringing its market capitalization to $268.18 million. This is an encouraging sign for investors, though the company’s market cap is still lower than it was at the time of its initial public offering in 2016.
As Simply Secure continues to consolidate power, the next steps for tTech will be critical. The integration of Simply Secure’s operations with tTech, coupled with a fresh strategic vision, has the potential to turn the company’s fortunes around. However, with leadership changes, restructuring costs, and ongoing financial losses, it remains to be seen whether the new direction can restore tTech to profitability and growth.
What Lies Ahead for tTech and Simply Secure
The takeover of tTech by Simply Secure signals the beginning of a new era for both companies. With the potential to further integrate their technological capabilities, Simply Secure aims to solidify its position as a leader in IT consultancy and security services. For tTech, the future will be determined by how well the company navigates the challenges of restructuring, profitability, and maintaining its market presence under the shadow of its new majority owner.
As Simply Secure prepares to submit its mandatory bid to acquire the remaining shares, the next phase of this corporate takeover will be critical. Stakeholders, both within tTech and in the broader Caribbean tech ecosystem, will be watching closely to see if this acquisition marks the beginning of a successful reinvention for tTech or if the company’s challenges will continue to mount under new ownership.
