Akka Raises EUR 175m in Convertible Bonds. But Why?

/ November 28, 2019/ Akka, France, M&A (large, with revenues above $50m), News

We don’t usually comment on the financial performance of ER&D service vendors beyond their financials. But this time, this is a little bit different: Akka Technologies raised yesterday EUR 175m in convertible bonds, a significant amount for Akka, which has a market cap of EUR ~EUR 1.2bn.

Invest Securities’ financial analyst raised the question of why Akka is financing its growth at a higher cost (3.5%) than it currently does (1.7% for its net debt of EUR 369m). The financial analyst speculated that Akka is preparing a significant acquisition.

During its H1 2019 earnings presentation, Akka had mentioned it still had M&A ambitions, less than one year after its $100m acquisition of PDS Tech. The company has $420m in funding (through its gross cash and credit facility) and wanted to secure another EUR 370m, of which EUR 70m in Q3 2019.

As far as we are aware, Akka has not secured yet the EUR 70m extra funding in Q3. But it now has EUR 175m in additional cash in its books and EUR 150m in FCF expected by the end of 2019. In total, Akka almost has EUR 750m in gross cash for its M&A activity and also organic development. Even taking covenant restrictions, Akka indeed has the means to make further acquisitions.

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