Patent translation group RWS (RWS:AIM) is set to buy Moravia, a technology-enabled localisation company, for $320m. The deal will be part funded by a £185m share placing.

Moravia has some top tier technology clients including Microsoft and provides language services, productivity services and also tests and engineers products.

The target company can translate and localise content and products into over 170 languages using its technology.

Chairman Andrew Brode, says the deal ‘will greatly increase our exposure to the high growth technology sector...and will extend our global presence’.

RWS is keen to get this deal done fast, hence it is issuing new shares equal to around 20% of its current share capital.

WHAT IS A CASHBOX PLACING?

A spokesperson for RWS says the method of share placing, called a cashbox, is being used to guarantee speed and certainty of the deal being done.

A cashbox placing allows a company to issue new shares without shareholder approval provided they are being used for a non-cash consideration, which usually means an acquisition.

RWS Holdings

In an RNS statement, RWS says that using this structure will ‘maximise the company’s chance of success in a competitive auction process for Moravia’.

While using a cashbox will certainly speed up the time it takes RWS to receive the funds needed, it has also triggered a 15.2% drop in the share price to 457p.

The price of the new shares hasn’t been set yet so the market looks to be factoring in a substantial discount.

Prior to Wednesday’s news of the acquisition, shares in RWS had appreciated by 36.5% since releasing a year end trading statement on 6 October describing 2017 as its ‘best year ever’.

With the company trading on a racy 34.8-times forward price to earnings according to data from Reuters, strong growth is clearly expected of this company. Management will hope the acquisition of Moravia, with access to global tech leaders, may justify such a lofty valuation.


Issue Date: 18 Oct 2017