Melbourne IT splashes $22m on stake in app developer

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Melbourne IT splashes $22m on stake in app developer

Takes over 50 percent of Outware Mobile.

ASX-listed domain name registration and website hosting company Melbourne IT has spent $21.7 million on a 50 percent stake in app developer Outware Mobile.

The deal, announced to shareholders this morning, gives Melbourne IT the option to expand its holding in the company to 100 percent in the next two years.

Such a move would bring the total stake to a value of $67 million, dependent on Outware's performance. Melbourne IT is funding the acquisition entirely from debt.

The purchase forms part of Melbourne IT's efforts in recent years to diversify out of web hosting and into cloud services.

Its existing cloud consulting business offers infrastructure and data centre migrations as well as data and application integration.

Outware Mobile will retain its branding and management and live within Melbourne IT's enterprise services division, alongside the existing web and digital application and cloud solutions businesses.

The company was founded in 2009. For its current financial year, Outware Mobile has forecast revenue of $15.6 million and EBITDA of $5.1 million.

Its 115 employees across Melbourne and Sydney will add to Melbourne IT's 210 staff.

Outware Mobile boasts a client base including the likes of ANZ Bank, Google, Telstra and Coles. 

Melbourne IT said the two businesses shared a number of clients, and would leverage the existing customer bases of both organisations while looking to accelerate new clients thanks to the expanded service offering.

"Mobile plays a critical part of our daily lives and Outware Mobile has a pivotal role in helping some of Australia's leading organisations design and develop successful mobile experiences," Melbourne IT managing director Martin Mercer told investors.

"This acquisition makes perfect sense. It enables us to deliver a complete and comprehensive service and a compelling value proposition to the market."

Melbourne IT expects Outware will contribute around $3.1 million to its EBITDA in the current calendar year. The transaction will complete on June 16.

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