Ann: Proposed Sale of Cybersecurity Business, page-6

PROPOSED SALE OF CYBERSECURITY BUSINESS

• Proposed sale of Cloudten and Decipher Works for $25m to CyberCX
• 100% cash transaction
• 196% return on investment
• $20m to be returned to shareholders

Vortiv Limited (ASX:VOR) (“Vortiv” or “the Company” announces it has executed a conditional share sale agreement regarding the proposed sale of its cybersecurity business to CyberCX Pty Ltd (“CyberCX”.

PROPOSED SALE OF CLOUDTEN AND DWX FOR $25M CyberCX, one of Australia’s leading cyber security services organisations, proposes to acquire 100% of the shares in both Cloudten Industries Pty Ltd and Decipher Works Pty Ltd (collectively, “Business”, based on the following key terms:

• total consideration reflecting a combined enterprise value of $25 million, on a cash free and debt free basis, with normal level of working capital;
• 100% paid in cash on completion; and
• sale completion is subject to the following key conditions:

o Vortiv shareholder approval;
o CyberCX gaining FIRB approval to acquire the Business;
o retention of key staff and key customers; and o no material adverse change occurring in the Business prior to completion.

As the Business presently represents the main undertaking of Vortiv, the Board will convene an Extraordinary General Meeting, scheduled for early December 2020, to obtain the approval of Shareholders as required under ASX Listing Rule 11.2, for the sale of the Business to CyberCX.

Where Vortiv shareholders vote in favour of the transaction, it is then expected to proceed to Completion on or around 18 December 2020.

UNANIMOUS BOARD RECOMMENDATION The Directors unanimously recommend that Shareholders vote in favour of the transaction, in the absence of a superior proposal emerging. Further, each Director who is also a shareholder and who is not otherwise restricted from voting intends to vote in favour of transaction.

USE OF SALE PROCEEDS Subject to completion of the transaction, Vortiv intends to return approximately $20 million to shareholders, in the form of a limit based equal access share buyback (Buyback). This amount represents the vast majority of net sale proceeds after accounting for estimated tax payable on the gain on sale of the Business plus legal and advisory costs directly associated with the transaction, collectively totalling approximately $3 million. Vortiv is applying for an ATO Class ruling which seeks confirmation of the related tax treatment of the Buyback. Such ruling is expected to be received by January 2021, with the Buyback to proceed shortly thereafter.

BUYBACK The Company will set a limit of $20 million (Limit) to undertake the Buyback, with the buyback price to be set with reference to the share price at that time. Shareholders will be able to tender as many or as little shares as they choose to be bought back by the Company, up to their full holding. At the conclusion of the Buyback offer period, all buyback requests will be tallied.

Where there is an undersubscription (i.e. less shares tendered for sale by shareholders than the Limit set by the Company), then all shares tendered will be bought back by the Company and such shares subsequently cancelled.

Where there is an oversubscription (i.e. more shares tendered for sale by shareholders than the Limit set by the Company), then all offers to sell Shares will be proportionately scaled back. All shares bought back by the Company will be subsequently cancelled. This mechanism provides shareholders with a choice to stay invested in the Company as it continues to pursue new acquisition opportunities.

INTENTIONS FOR VORTIV POST TRANSACTION Following completion of the Transaction, the Board intends Vortiv remains an ASX listed company, with its shareholding in TSI India, then forming the main undertaking. The Board has identified acquisition opportunities in the Australian technology sector that can complement the Company’s exposure to ATM and associated payments technology which the Company has through its shareholding in TSI India. These opportunities are currently at an early stage and may not ultimately progress to a transaction. A further update to shareholders will be provided at the appropriate time.

Where the Company proceeds with an acquisition which is either significantly larger in value than its shareholding in TSI India and/or in a different industry segment, ASX will invariably exercise its discretion under Listing Rule 11.1.3 to require the Company to re-comply with ASX’s admission and quotation requirements.

NOTICE OF MEETING In due course, Vortiv shareholders will be provided with a Notice of Meeting and accompanying Explanatory Statement and Independent Expert Report which will contain full details of the proposed transaction and next steps.

ADVISERS BDO Corporate Finance is acting as lead M&A adviser and Squire Patton Boggs as legal adviser to Vortiv regarding the transaction.

COMMENTARY Mr Gary Foster, Chairman of Vortiv, commented: “Vortiv is extremely pleased to deliver an outcome which achieves significant value for all our key stakeholders - our people, clients and shareholders. Vortiv’s active management of the two businesses, which were acquired over the last 3 years, has greatly assisted in achieving organic growth of more than 30% p.a. and generating a significant return on investment of 196%, through pure hard work and sticking to our formula.

We are pleased to support the transition of the business to new owners who are well placed to continue supporting the clients for many years to come. Over the next six months, Vortiv intends to explore new acquisition opportunities in the Australian technology sector and build on its demonstrated ability to create value from its acquisitions.”