SIMPLY Secure Limited has purchased another 20 per cent of IT consultants tTech Limited to move its stake to 69.08 per cent of the company’s ordinary shares, a move that has forced Simply Secure to initiate a mandatory takeover to all remaining shareholders to purchase their ordinary shares in the Junior Market-listed company.

Simply Secure Limited, a St Lucian International Business Company (IBC), spent $45,946,405.20 on Friday to acquire an additional 21,216,389 ordinary shares in tTech to bring its total interest to 73,229,223 ordinary shares. It acquired 14,298,816 ordinary shares at $2.20 from Enqueue Inc, a St Lucian IBC holding company owned by Norman Abraham Chen, and 6,420,550 ordinary shares at $2.20 from Auctus Holdings Inc, a St Lucian IBC holding company owned by Gordon Christopher Reckord.

Both men are former CEO’s of tTech, with Reckord serving between March 2018 to November 2022 while Chen ran the business from December 2022 until July 12, a day after Simply Secure bought a 49.07 per cent stake in the company. Reckord and Chen will be resigning as directors of tTech following this sale.

“I would like to thank Norman and Chris for their service to tTech. Their contribution as executives and directors has enabled much of the success that tTech has enjoyed to date. We now look forward to the continued growth that is expected through the increased ownership in the company by Simply Secure,” stated Edward “Teddy” Alexander, chairman and co-founder of tTech, in the Jamaica Stock Exchange (JSE) disclosure.

Simply Secure acquired its initial stake on July 11 when it purchased 46,712,834 ordinary shares from Alexander at $2.20 and 5,300,000 from Auctus Holdings at $2.20. These cumulative purchases by Simply Secure have cost $160.374,640 (US$1,015,067.73).

Simply Secure Limited is owned by Kevin Gordon and Rob Mayo-Smith, the owners of a Florida managed security services provider called Simply Secure LLC or Simply Secure Group. Gordon serves as the CEO of Simply Secure LLC while Mayo-Smith is the chief operating officer (COO). Following their initial purchase in tTech both men were appointed directors of the company on July 12, with Gordon being appointed the CEO on the same day while Mayo-Smith was appointed COO on July 25.

What is a takeover bid?

The JSE’s rules require that a mandatory offer must be made to all shareholders of the same class of shares when any person acquires more than 50 per cent voting rights in the company or control of the listed entity. That offer will be made to all shareholders of that share class at the same price. However, shareholders are not predicated to accept or deposit shares in connection with that takeover bid if the consideration offered does not satisfy them. Consideration can be cash, shares in another company, a mixture of both, or any other asset of value that can be exchanged to settle the transaction. These details, along with other key pieces of information, would be contained in the takeover bid circular.

According to Part III, Section 12 (1) of the Securities Act, Simply Secure Limited is required to make this takeover bid to shareholders within 30 days of November 15, this being the date it acquired control of the company. An expert’s report on the circular would be published as well, giving an opinion or statement on the document provided to shareholders. The board of tTech Limited (offeree company) would be required to produce a directors’ circular whereby a recommendation to accept or reject the offer would be disclosed for shareholders to use in evaluating their decision. In prior takeover bids the director’s circular is usually produced by a subcommittee of independent directors who are not connected to the offer by the acquiring company.

As part of this requirement to do the takeover bid, Simply Secure Limited will have to demonstrate the adequacy and availability of funds to acquire the remaining 32,770,777 ordinary shares of tTech. However, it’s not likely that Simply Secure will acquire more than 80 per cent of tTech’s ordinary shares due to the implication it would have for possibly delisting the company. JSE rules require at least 100 shareholders to own at least 20 per cent of a company’s issued ordinary share capital as part of its listing requirements. Thus, it’s likely that Simply Secure would not acquire more than 11,570,777 shares to ensure that tTech remains in compliance with JSE rules, thereby allowing tTech to remain a publicly listed company wherein it has greater exposure on a public capital market.

Apart from Simply Secure, Enqueue and Auctus, the other top 10 shareholders, own 19,900,120 ordinary shares of tTech while the senior managers and directors (excluding those who have sold) own 1,085,088 ordinary shares, based on the September 30 shareholding list. However, it’s unknown where the estate of co-founder Hugh O’Brian Allen, which owns 8,367,479 ordinary shares, has reached in the probate process following his sudden passing on April 26. Mayberry Jamaican Equities Limited is the other significant shareholder with 6,341,074 shares.

What’s happened to tTech since July?

The tTech company has been undergoing a strategic restructuring programme since July 11 which is meant to enhance efficiency and align the team’s growth initiatives. One of these initiatives is the integration of the tTech and Simply Secure LLC’s teams into a single operational structure that has eliminated redundancies, streamlined operations, and fostered greater collaboration between both entities. There was also the consolidation of the support desks of both companies and proactive customer engagement to better monitor clients’ networks, safeguard the security of clients’ data, and offer timely patches or updates.

While these moves are expected to yield positive returns in the future, they also drove up third-quarter expenses by 44 per cent, from $38.95 million to $56.05 million. One of these one-off expenses was termination benefits of $3.15 million, which was connected to a related party of tTech. When combined with a 15 per cent dip in gross profits to $43.60 million, the company swung from an operating profit of $6.52 million to an operating loss of $5.93 million. The third quarter saw a net loss of $5.90 million compared to a net profit of $5.82 million in the comparative period.

For the overall nine months, tTech’s revenue was down five per cent to $336.19 million, with the company reporting an operating loss of $231,000 relative to a $21.33 operating profit. There was also a net loss of $75,000 compared to a $18.60 million net profit in the nine months of 2023.

The total assets of tTech were up 11 per cent over the nine months to $357.41 million, with $98.04 million between cash and resale agreements. Total liabilities was $123.09 million while shareholders’ equity was $234.31 million.

TTech increased by 15 per cent on Monday to $2.53, which left it with a market capitalisation of $268.18 million. The initial public offering (IPO) of tTech was $2.50, which was also the same price it listed on January 7, 2016. The company has paid $0.206 in dividends since listing. However, the company’s market cap at listing was $265 million (US$2.199 million) versus Monday when it was worth US$1.684 million.