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Catuity Acquires Profitable Australian Loyalty Processor

Friday 18 March 2005 18:29 CET | News

Catuity, has signed a definitive purchase agreement to acquire Loyalty Magic Pty Ltd., adding a profitable growth platform to its existing U.S. business.

The company will acquire all the outstanding shares of Loyalty Magic for A$5.5 million (or USD $4.35 million). Of the total consideration, 35% will be issued in new shares and Loyalty Magics management team and the companys sole institutional investor will hold the majority. The combined company will have a 40-person team serving existing customers in Australia, New Zealand, and North America. The transaction, which is subject to shareholder and other customary approvals, is expected to close following Catuitys Annual General Meeting in late May. Melbourne will become the operational center in Australia. Catuitys corporate headquarters remains in Detroit, Michigan. Loyalty Magic, which was founded in 1995, delivers loyalty programs for their customers by either hosting or licensing their software. Some of their well-known customers include retailers Amcal, API, ABC Shops, Jigsaw Clothing and Jamaica Blue as well as leaders in the gaming and leisure sector: Tabcorp., Sky City Entertainment Group and Panthers Entertainment Group. Allen & Buckeridge is expected to be the largest institutional shareholder in Catuity after the deal closes. The firm will have board observer rights. The benefits of the acquisition include: Adding a cash flow positive company with an increased presence in Australia, where 85% of Catuitys dual-listed shares are traded on the Australian Stock Exchange. Selling Catuitys gift card solution to meet the growing demand in Australia. Nearly 2,500 merchants in North America currently use Catuitys existing gift card solution. Ability to leverage in North America the experience of Loyalty Magic in managing databases with more than two million members. A stronger balance sheet to compete for more opportunities in both markets. For Catuity, this transaction is the next step in the companys turnaround strategy, which includes using selected acquisitions to establish the nucleus of a new, profitable company. The company will soon announce a capital-raising plan in Australia to fund the acquisition and provide growth capital for the combined company. The five directors of Catuity have personally committed to purchase shares worth at least A$550,000 (US$435,000) as part of the capital raising effort. Shortly, the company will announce details of its formal plans. Catuitys turnaround strategy goes beyond the acquisition of Loyalty Magic and beyond the Australian market. Catuity has active discussions underway in North America with companies similar to Loyalty Magic. At this time, the company cannot provide assurance that any of those transactions will close.


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Categories: Payments & Commerce | Payments General
Countries: World
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Payments & Commerce