'Pros' significantly outweigh 'cons' of GeoOp merger with InterfaceIT, adviser's report says

The pros of GeoOp's [NZX: GEO] planned merger with Australian mobile sales app developer InterfaceIT "significantly outweigh" the cons of the deal, says the independent adviser hired to assess the deal.

Auckland-based GeoOp, which develops a workforce management app, is asking shareholders to approve a deal where it will buy InterfaceIT for $9 million in shares and convertible notes. The deal would see the Australian company's owners hold about 32% of the merged entity, rising to as much as 64% if certain conditions are met in what Simmons Corporate Finance called a worst-case scenario for the GeoOp shareholders in its report on the deal.

The independent adviser valued InterfaceIT at between $6.1 million and $8.5 million and added an additional $2.3 million to $4 million of benefits arising from a merger.

"While the potential dilutionary impact is significant, we are of the view that the GeoOp shareholders' main focus should be on whether there is any dilutionary impact on the value of their respective shareholdings rather than on their level of voting rights," the report said. "We are of the view that the IIT Acquisition is fair to the GeoOp Shareholders from a financial point of view and therefore does not dilute the value of their respective shareholdings."

GeoOp is holding a special meeting on May 5 in Auckland where shareholders will vote on proposals to approve the deal, including the appointment of InterfaceIT's Roger Sharp to the board. Sharp will replace Mark Weldon as chairman. Mr Weldon will stay on as a director.

As part of the deal, GeoOp will give North Ridge Partners, one of InterfaceIT's vendors, a mandate to advise on a potential capital raising, which would coincide with or precede a listing on the ASX.

Simmons Corporate said if the deal isn't approved GeoOp will need to raise new capital in the near future at its current spending rate.

"The non-approval of the acquisition could possibly have negative implications for future capital raising initiatives as potential investors may be hesitant to invest in the company – especially if shareholder approval is required," the report said.

The NZAX-listed shares last traded at 30c and have dropped 25% this year.

(BusinessDesk)

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