Independent directors of tTech Limited have recommended that existing shareholders of the company accept Simply Secure Limited’s mandatory takeover bid of $2.20 per share, which is set to close on January 6.

Simply Secure launched its takeover bid for the remaining 32,770,777 ordinary shares of tTech on December 13 at a takeover price of $2.20, the same price paid to Edward “Teddy” Alexander, Enqueue Inc, a St Lucian IBC holding company owned by Norman Abraham Chen, and Auctus Holdings Inc, a St Lucian IBC holding company owned by Gordon Christopher Reckord. As part of the Jamaican Securities Act, tTech’s board of directors was required to provide a directors’ circular and an expert report on the takeover offer provided to shareholders.

A special subcommittee comprising Richard Downer, Tracy-Ann Spence and Joan Marie Powell was commissioned to review and evaluate the offer, which included seeking a fairness opinion from an independent expert. The subcommittee put this expert report request to tender through a request for proposal, with Jamaica Money Market Brokers Limited (JMMB) winning that bid to provide the valuation report and fairness opinion.

JMMB determined that 100 per cent of tTech’s ordinary shares were valued at $233.1 million or $2.20 per share as of September 30, under the assumption (scenario 1) that tTech doesn’t delist after the offer is completed. However, the valuation drops to $208.20 million or $1.96 per share if the company delists after the takeover offer is complete (scenario 2).

JMMB came to these valuation figures after completing two scenarios using the income-based approach through a discounted cash flow analysis. Under the assumption that tTech remained listed on the JSE (scenario 1), JMMB determined the present value of cash flow up to 2028 to be $64.05 million and an overall enterprise value of $218.58 million. After removing the lease liability, the en bloc fair market value as at September 30 of tTech was $224.46 million.

Under scenario 2, the present value of cash flow was unchanged, but the enterprise value was $215.95 million due to the higher tax rate which the company would be subject to since it would no longer have the JSE Junior Market tax benefit which is set to expire in December 2026. Also, the en bloc fair market value of tTech came in at $197 million due to the repayment of the JSE tax relief of $24.83 million.

The reason for mentioning delisting is due to Simply Secure expressing no intent to keep tTech listed in its takeover bid circular. Also, Simply Secure has mentioned its intent to use a portion of the Jamaican Companies Act to acquire all the shares not surrendered in the takeover bid to make tTech a wholly owned subsidiary. Simply Secure currently owns 69.08 per cent of Ttech’s issued ordinary shares.

The valuation report gave a snapshot on tTech, analysed the risks of the business and did overviews on the IT services market and used comparable companies such as Tridhya Tech Limited, Delaplex Limited, Mindtell Technology Limited and Fortinet. When compared against these businesses, tTech was in the mean region for gross margins on revenue but was on the lower end for the EBITDA margin and net profit margin. tTech is not expected to meet its projected $450.82 million in revenue and $18.34 million in net profit for the 2024 financial year while it projects to earn $485.35 million in revenue in 2026 and $19.98 million in net profit.

Simply Secure is a St Lucian IBC with its principals being Jamaican Kevin Gordon and New Zealander Rob Mayo-Smith who also sit on tTech’s board with Gordon being tTech’s new chief executive officer while Mayo-Smith is tTech’s chief operating officer. Both Gordon and Mayo-Smith also run managed security services provider Simply Secure LLC, which is based in Fort Lauderdale, Florida, with the same positions as seen with tTech.

tTech’s stock price closed Tuesday at $2.03 which leaves it down eight per cent year-to-date and below the takeover price. tTech’s stock price traded at $1.61 on December 13 and $1.70 on December 19 which is a substantial discount to the takeover price. Any acceptance of the takeover price by remaining shareholders becomes irrevocable after December 20 with the overall offer set to close on January 6.

tTech has undergone restructuring since July as tTech and Simply Secure move into a single operational structure. That saw the company spend additional sums in the third quarter ahead of the takeover bid and the termination of service contracts with four customers.

On Friday, tTech announced that Marsha Bucknor, who held the positions of sales and marketing manager and company secretary, resigned on December 13 and Hortense Gregory-Nelson, tTech’s finance and administrative manager, will resign on December 31. Gordon will assume Bucknor’s responsibilities while Mayo-Smith will assume the responsibility of the finance and administrative portfolio until further notice. Lesley Cousins was appointed company secretary on December 14.