MTI Wireless Edge Ltd Acquires Mottech Water Solutions Ltd.

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MTI Wireless Edge (AIM: MWE), the developer and manufacturer of sophisticated antennas and antenna systems, is pleased to announce that it has entered into a conditional share purchase agreement to acquire 100% of Mottech, a provider of wireless control products and services, for a consideration of up to 18.55 million New Israeli Shekels ("NIS") (approximately US$4.75 million) from which 15.5 million NIS (US$4 million) will be paid upon closing and the reminder by April 2018 based on the financial performance of Mottech in 2016 and 2017 (the "Acquisition").

Highlights

 - Acquisition of Mottech, a provider of wireless control products and services to the water management sector.
 - Mottech's revenue for the period of May to December 2014 was 26.5m NIS (US $6.6m).
 - Gross profit for Mottech during the period of May to December 2014 was 11.1m NIS (US $2.8m).
 - Mottech has 60 employees and a presence in 5 continents via subsidiaries and resellers.
 - Earnings enhancing acquisition with revenue and profit growth potential.
 - Platform for MTI to expand business strategy from the manufacture of antennas to include the provision of wireless services with recurring revenues.
 - Funded out of MTI's existing cash resources and new bank facilities to be put in place.
 
"We are delighted with this earnings enhancing acquisition that enables MTI to step up the value-chain and provide wireless control solution and services" commented MTI CEO, Dov Feiner. "We expect the market for Mottech's core water management services to expand and we look forward to applying Mottech's remote control and monitoring systems in other markets."
 
Mottech is a global distributor and integrator of Motorola's wireless control solutions, which includes a portfolio of radio-enabled sensors and switches managed by control software. Mottech primarily operates in the water management sector and has developed proprietary wireless management solutions for commercial irrigation, municipal water authorities and water distributors. A typical solution reduces costs for the client, for example Mottech provides a commercial farm irrigation system that monitors the local environment, weather and soil sensors in real-time and Mottech's propriety software automatically operates irrigation and fertiliser pump stations to optimise these critical costs for the farm.

Mottech was set up in May 2014 and acquired its business and assets at the same time from the Israeli court. The assets had been placed in the Israeli court following the previous owner going into administration as result of business failure at a subsidiary which is not part of Mottech or its business today. During the period from May to December 2014 Mottech's audited accounts show revenue of 26.5m NIS (US$6.6m) from distributing Motorola's wireless control products, system integration and management and maintenance services. Mottech is headquartered in Israel, and has 60 employees worldwide, including subsidiaries in South Africa, Australia and the US.

The Directors of MTI believe that by utilising MTI's significant marketing and operational experience and existing platforms, in the short term, it will be able to exploit additional value from Mottech by:

 - increasing revenues of both Mottech and MTI; and
 - increasing profitability of the enlarged group by using synergy in operation and administration.
 
Longer term, MTI will look to leverage its experience and reputation in the manufacture of sophisticated antennas and move up the value chain to provide wireless management and control solutions for internet enabled devices (often referred to as the 'Internet of Things' "IoT"). The Directors consider that the acquisition and integration of

Mottech within MTI will enable the enlarged group to:

 - address a broader range of consumers and markets;
 - increase MTI's offering into full solution and service offering;
 - leverage MTI's development methodologies into Mottech capabilities;
 - build a recurring revenue stream from service fees and royalties.
 
MTI expects to be able to generate increased recurring revenues from Mottech following completion of the Acquisition.

Consideration and conditions of Acquisition

The total consideration for the Acquisition is up to 18.55m NIS (approximately US$4.756), with 15.5m NIS (approximately US$4m) payable in cash on completion and a maximum of a further 3.05m NIS (approximately US$0.75m), on certain debt collections and revenue targets being achieved by the end of 2017. Subject to satisfaction of the relevant conditions, the Acquisition is scheduled to complete in May 2015. The vendor of Mottech is Homline S.M Ltd., a private company registered in Israel.  
 
The Acquisition is conditional, inter alia on:

 - the approval of Israeli antitrust controller;
 - the receipt of Motorola approval for the Acquisition;
 - the warranties given by Mottech and its owners to MTI in respect of the Mottech business remaining true and accurate as at completion of the Acquisition;
 - there being no material adverse change in the financial and trading position or prospects of the Mottech business before completion of the Acquisition; and
 - the approval of Mottech's banks.
 
The Acquisition is to be funded out of MTI's existing cash resources and new bank facilities to be put in place.