Cloud storage software provider Leonovus has signed a Letter of Intent (LOI) to acquire PureColo Inc., a colocation data center provider in Ottawa, Ontario, Canada. The target purchase price, in Canadian dollars, is $3 million plus the assumption of $500,000 in debt.
PureColo has 20 customers -- including major telecom carriers, MSPs, multinational corporations and product development companies, the seller says.
Leonovus plans to couple its Vault and Smart Filer technology with PureColo to "allow customers to analyze their data and optimize where it is stored while ensuring it remains both available and secure."
Buyer and Seller: Losing Money, Seeking MSPs
PureColo is losing money but growing fast -- particularly on the monthly recurring revenue (MRR) front. PureColo's financial metrics, in Canadian dollars, include:
- Annual unaudited revenues of $265,439, net losses of $241,298 and total net assets of $412.972 as of December 31, 2019.
- MRR of $32,000 as of February 2020.
- Forecasted MRR to exceed $50,000 per month by the end of 2020 along with positive EBITDA by that time.
- Note: All figures above are in Canadian dollars.
Leonovus has also been losing money. The company's financial metrics, in U.S. dollars, include:
- For its quarter ended September 30, 2019, the company had a net loss of $1.04 million, and a nine-month net loss of $3.96 million.
- $1.18 million in cash as of September 30, 2019, down from $3,6 million in cash as of December 31, 2018.
With those figures and more in mind, Simply Wall St. has expressed concern about Leonovus's cash burn rate.
Leonovus Pursues PureColo Acquisition: Financing Needed
The proposed deal is conditional on due diligence and several other variables -- including financing. Leonovus has started discussions with potential lead/strategic investors to finance the deal and provide additional working capital, the buyer says.
In a prepared statement about the pending deal, Leonovus Chair and CEO Michael Gaffney said:
“We believe that with transformative technological advancements growing the need for Edge Computing, there is a compelling opportunity for small, nimble colocation centres with value-added services such as Leonovus Vault and Smart Filer technology."
Added Rainer Paduch, president and CEO, PureColo:
"We at PureColo are excited to be working with Leonovus to address another hurdle introduced by cloud computing. This is the high cost of basic storage and transit fees. The Leonovus products will give our customers greater architectural flexibility and much lower infrastructure costs."
The number of data center mergers and acquisitions set a record in 2019, driven by private equity-driven M&A deals, according to Synergy Research Group.