Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the Tinexta conference call. As a reminder, all participants are on listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Josef Mastragostino, Chief Investor Relations Officer. Please go ahead, sir.
Thank you, Operator. Good morning, good afternoon. Thank you for joining Tinexta's conference call on the exercise of the call option on Defense Tech. Here with me today, Pier Andrea Chevallard, CEO of Tinexta, Oddone Pozzi, Group CFO. As a reminder, all the relevant documentation relating to the conference call can be downloaded from our company website. For the purpose of this call, Pier Andrea will provide some key strategic statements relating to the announced deal. I will go over the highlights in the form of an executive summary, and Oddone instead will go over the transaction details as well as all the other financials. The last part of the call will be dedicated to Q&A. A recording of this conference call will also be available on our company website, and it will be posted upon completion of this call. At this point, I will leave it to Pier Andrea.
Thank you, Josef. Good afternoon to all of you, and thank you for being here. I'm really delighted to announce the exercise of the call option on the reference shareholders for a total enterprise value of EUR 67 million. I believe this is a very important step forward for Tinexta's equity story, as the sector remains extremely interesting and very promising. The important deal will allow Tinexta Group to increase its national presence by entering both the public administration and private enterprise segments, increasing the outreach of our cybersecurity operations in Italy. With this additional expansion, we are further consolidating our position and therefore the market by becoming a key industrial player in the cybersecurity space in Italy. Defense Tech is an extremely strategic asset, and we are now exercising the call option at a very attractive valuation, which makes the deal even more attractive also from an economic perspective.
Obviously, following both Golden Power authorization and acceptance from the reference shareholders of the exercise price, Tinexta will adhere to the obligation of launching a mandatory tender offer. By entering Tinexta Group, Defense Tech will be able to further develop its high-value projects already in the pipeline, as well as increase the know-how and offering of Tinexta Cyber. More in particular, we will be able to enter the national perimeter of the cybersecurity, which is an extremely important and distinguishing element that will allow us to be considered among a very selected group of companies. This will give us access to the world of cryptographic solutions for defense applications where the most advanced technologies are developed, tested, and produced.
As you all know, Defense Tech has national security clearance status and this will guarantee the group not only a preferred access to the public administration channel, but also the opportunity to expand and offer its services to a larger share of clients. Going further, Defense Tech is a series of proprietary cyber products. They will further enhance the product offering of Tinexta Cyber, in particular for dual-use application. Lastly, we are very excited for this decision and believe very strongly in the strengthening of our cyber pole in Italy, which paves the way for possible future collaboration with all the other areas of our business. I leave now the floor to Josef and Oddone to provide you with further details on the transaction. Thank you very much.
Thank you, Pier Andrea. Turning to page four of the presentation, we have a recap of Defense Tech's announced results. From a revenue perspective, in 2023, they reached EUR 22 million, growing 1.4% versus the prior year. On an EBITDA-adjusted basis, in 2023, they grew 11.9% at EUR 9 million. I think it's important to highlight the key strategic margin, which is north of 40%. As background information, we had presented, obviously, public information related to Defense Tech already when we announced the call option back in December of 2022. As you might recall, in April of 2023, we did the closing of 20% minority stake in Defense Tech. The company was established in Rome back in 2010. The company creates and certifies systems for the management of classified information aimed at protecting critical infrastructure.
Now, as of today, on the bottom right of the slide, you can see what is the actual equity value of the call option, which considers for 100% consideration a payment of EUR 62.3 million. Now, going to page five, just to clarify to all investors and shareholders and analysts who's buying what. In this case, we remind everybody that it is a cybersecurity business unit that is buying, therefore, via a vehicle and exercising the so-called call option that we described today. The initial stake was purchased, as we said, closed in April 2023, and the price for the option was already set on a 2023 EBITDA-adjusted basis times a multiple of 12, plus the pro forma adjusted net financial position. But Oddone will definitely go over all the details. The enterprise value relating to the call option is equal to EUR 67.2 million. Moving on to page six.
So today, the board of directors of Tinexta S.p.A. has decided to exercise the call option on Defense Tech Holding S.p.A. for EUR 2.44 per share or EUR 24.9 million. Describing the deal and the structure, as a reminder, on 29 December 2022, Tinexta had signed a binding agreement to purchase 20% stake of Defense Tech Holding S.p.A. via a wholly owned vehicle called Tinexta Defense. The purchase of a minority stake, as you might recall, was priced at EUR 4.9 per share. On 21 June , which is today, Tinexta exercised the call option on 40.09% of the share capital relating to the selling shareholders. As a reminder, the selling shareholders are Comuni mpresa and GE.DA Europe. The call option price, as we said, is equivalent to adjusted EBITDA 2023 base times 12x plus pro forma adjusted NFP.
In terms of next steps, Pier Andrea highlighted, but we want to stress the point that the transfer of shareholding covered by the Tinexta call is subject to Golden Power authorization, as well as the process of verifying the exercise price of the Tinexta call by the selling shareholders. Following the transfer of the shareholding, the vehicle Tinexta would hold, again, I would precise, would hold 60.09% of the share capital of Defense Tech, and this will consequently trigger a takeover bid or public offer to be launched on the whole share capital not owned.
As a reminder, following the launch of the takeover bid, the current shareholder, Starlife, comprised of the company's management, had already expressed its intention to tender a portion of the shareholding representing about 3% of the issuer's shares in acceptance to the offer, and following the completion of a successful offer, confer the residual portion of its shareholding in Tinexta Defense. As a result of the transfer, in the event of a successful tender offer, Tinexta Defense would be held by Tinexta as well as Starlife. There is also a put/call option in place between Tinexta and Starlife regarding Starlife's stake in Tinexta Defense, which is exercisable by 2029 to be settled in cash at fair market value. Again, call option valued 100% of the equity value is EUR 62.3 million or equivalent to EUR 0.0244 per share.
Tinexta also estimates that the industrial and commercial synergies obtained at a group level will be able to generate, when fully operational, an additional EBITDA of approximately EUR 2 million. Finance is already in place to fulfill both the call option and potential takeover, but Oddone will give you all the details in a bit. Turning to page seven, we all remind the market that we are exercising this call because there is a strategic rationale behind it to add value. That means enlarging the overall integration of services and infrastructure, strengthening the advisory part of cybersecurity as well as the managed security services. Pier Andrea highlighted a very important aspect, which is expand the company's presence in the public administration market, consolidate the presence in the government sector, given that DTH Defense Tech is a partner of strategic importance to all national security.
This is a very important element because it's only a few selected number of companies. The acquisition is also strategic in terms of customer package because we will expand the overall customer package for the entire group. Turning to page eight, this is a reminder primarily of what Defense Tech is made of. As you might recall, there are three business areas: cybersecurity and technology, communication, and microelectronics. The company has four operating centers in Naples, Taranto, La Spezia, and Avezzano. The sectors are strategic by definition, and they are defense, space, transport, telecommunications, and finance. At this point, I will turn it over to Oddone, which will go over the transaction details and the financials.
Thank you, Josef, for this afternoon for everybody. So let's move now to page 10. As envisaged since the early communication about the potential acquisition of Defense Tech, this is a process in three steps. Prior to December 2022, the company has a free float of around 28% with other different shareholders. When Tinexta acquired the first 20%, the free float went down to 22%, and there were remaining also other shareholders on top of the management. Now, with the exercise of the call, as pointed out from Josef, Tinexta will move up to 60.09%. The free float is going to remain to 22.37%, and the management with Starlife will add the 17.5%.
So this is where we are now as a step, and Tinexta, so after having exercised the call, and we include also the process of approvals that were mentioned before both by Pier Andrea and Josef, we will be in a position to go through a mandatory takeover bid. After the public offer will be completed, basically, as already anticipated by Josef, Tinexta and the company is going to be delisted. Tinexta will own around 85%, while Starlife would be in the range of 15%. The company, over the last three years, increased constantly, both in terms of revenue and EBITDA, and the margins went up over the period up to 9%.
Additionally, the net financial position went down, mainly driven by two things: the significant level of investment, as well as the investment in working capital driven by the specific DSO of the industry, and obviously, like I said, by the growth in terms of revenue. The development of the company over the period includes also products. In 2019, the company was mainly focused on services. If we look at results of 2023, products account for almost one-third of the revenue. Obviously, this is changing a bit the mix and the margin inside that, as well as the level of CapEx. If we look at the clients, and now we can say that the government portion remained over the period basically stable at 77%, while the corporate part went up to 23%.
If we look at the perspective share around the market and how are you on Defense Tech, we would expect the revenue to grow at a compound average rate of 2024 to 2026 in the range of 12%, with the margin being around 29%. The acquisition has already included in the first quarter documentation of the group. The financing of the group of the acquisition will be done through a dedicated facility line as part of a club deal signed by Tinexta in April 2024. So basically, we have a facility fully dedicated to this specific deal. Josef and Pier Andrea talked both about the valuation of the call. This has been calculated, like we said, as a multiple of adjusted EBITDA, a multiple of 12x adjusted EBITDA 2023.
Obviously, the Adjusted EBITDA includes also an agreement which we signed with the seller that was taking into account some extra CapEx that could have been performed. The net financial position adjusted at the end of 2023 is negative by EUR 4.9 million, and also this is part of the agreement with the seller related to some specific part of the balance sheet. We came to an equity value of around EUR 64 million with a cash out for Tinexta in the range of EUR 25 million. The price per share, as already stated both by Pier Andrea and Josef, is EUR 2.44. Obviously, if you go through considering the valuation blended between the two different steps of our acquisition, the enterprise value on the EBITDA is around 10x. I leave it back to Josef for closing remarks.
Thank you, Oddone. So I'm on slide 14 just to highlight four major closing remarks. With the exercise of the call today, we are obviously going to further steps in terms of cybersecurity market in Italy with a very bold key strategic player. Another important highlight is the entrance in the national perimeter of cybersecurity and the preferred access that that will grant towards public administration. The M&A deal is accretive to the group, strengthening the marginality in the business unit. And lastly, we will leverage on scale for business model expansion, proprietary dual-use technology as mentioned by Pier Andrea, extremely important, and a combined network for increased sales and synergies, the synergies that we also announced today. At this point, I will ask the operator to open up any Q&A that there might be.
Thank you. This is the Chorus Call call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Federico Belluati of Kepler Cheuvreux.
Good afternoon, everyone. My question is regarding the potential timeline, especially regarding the Golden Power. Do you have an idea of how long it should take for the government to approve eventually your exercise? That's it, basically, from me.
We don't see any major problem in getting the authorization of Golden Power. They are supposed to give the authorization maximum in 60 days. We think it will be a little before.
Okay. Thank you so much.
The next question is from Diego Esteban of Stifel.
Hi. Oddone , can you hear me?
We can hear you.
Yeah. Okay. Hi. So first of all, congrats, congratulations for the acquisition to the entire team. I have two questions. One of them is when you talk about proprietary solutions, do you mean, for example, that they develop their own software, which they can then sell? And then is there going to be any impact to the NFP of Tinexta from this acquisition, as in for the remaining 40% that you still need to acquire, just to kind of see if you can give us some color on that?
Well, thank you. So Diego, the answer is yes, it is software. It's important that our product line with this potential acquisition will increase significantly. So that is one of the key strategic assets. But yes, to answer your question, it is based on software. Then you had a question on NFP, right? Could you please repeat it? Is it under 40%? What were you saying?
Yeah. So my question was referring to acquire the remaining 40%. Should we also take into consideration some kind of put-call options that might impact the NFP in the future or not?
What do you mean impact? Should we take into consideration what? Did you say for the 40%?
Yeah. So if you have some put-call options for the remaining 40%, such as when you have done with other previous acquisitions of private software.
No, no, no, no. No, absolutely. After having went through the steps that we already mentioned, we will go through a closing for acquiring the remaining 40%, as mentioned. So just to clarify, this is not like an acquisition of a company like we used to do, right? This is an acquisition of a stake, right? So the 40% would be paid upon surrendering the shares. Full stop.
Okay. Great. That's super answer. Great. Congrats again for the acquisition.
Thank you.
Thank you.
The next question is from Isacco Brambilla of Mediobanca.
Hi. Good afternoon, everybody. Three quick questions from my side. First one is for Oddone, you mentioned the theme of extra CapEx. Is this the only driver for the difference between the EUR 5.6 million EBITDA on which you base the calculation for DT and the EUR 9 million reported in 2023 by Defense Tech? So if you can elaborate a bit more on this, and if you can confirm that going forward, once we will have to consolidate Defense Tech, we should take EUR 9 million as the base in terms of EBITDA contribution by Defense Tech into Tinexta perimeter. Second question is on the financing cost. In the presentation, you mentioned attractive spreads. If you can elaborate a bit more on this, just give a sense of the range of total cost of financing of the new facility lines. Last question is on potential full impact on NFP.
Have you done any internal assessment of the total potential cash out in case of full acceptance of the tender offer and where pro forma and financial position may land?
Isacco, thank you for your question. Yes, obviously, it's a listed company, so we went through an agreement we had with the seller where, obviously, as a normal protection, we decided together to add in some adjustments based on potential variation in CapEx compared to what planned. So obviously, we took the balance sheet results and we applied what agreed on the CapEx. Nothing different. So on a pro forma basis, I would say that if I should consolidate on a pro forma basis, Defense Tech on Tinexta would be at EUR 9 million. That's it. Obviously, this has adjusted EBITDA, obviously, not reported because the reported is slightly different. If we go to the financing, our financing is at Euribor 6-month plus, let's say, when we will move above two times, this will be around 200 basis points.
And then we are scaling down and scaling up at different levels, as we already published in our Q1 report. If we move into it, I did not perform any evaluation on potential call price because this is not the time to go into it. So let's assume that if on a pro forma basis, we have to include the 63% of Defense Tech, we should be in the range of 2.2x, 2.3x the EBITDA at the end of 2024. Then what is going to happen is depending, obviously, when the closing will occur. We have some steps that have some uncertainty in terms of timing, the Golden Power, as you said, the checking procedure that is due from the seller. So it depends how much in terms of EBITDA we brought.
On top, on the net financial position, we will see when the mandatory takeover will take place. But in any case, as already shared with the market, what the analysts or investors was already mentioned, we do not expect to go far north of 2.0x the EBITDA for the consolidated group, including Defense Tech. It depends on which percentage we will reach, what will be the call, the takeover, whatever. But not significantly north of 2.5x.
Very useful, many thanks, Oddone.
Pleasure.
The next question is from Luigi de Bellis of Equita.
Yes, good afternoon. I have three questions. The first one is on the, can you elaborate better on the procedure for verifying the exercise price of the Tinexta call by the selling shareholder? So more color on the procedure for this verification. Second question, do you expect the price of tender offer to be in line with the call option price or the adjusted price after the verification, or do you expect to pay a premium for the control of the target? And the last question, sorry for bothering you on this, but can you give us more color on the main differences between your adjusted EBITDA and the one calculated by Defense Tech and also for the net financial position because there is a huge difference? What are these differences related to? Which CapEx are they referring to? Thank you.
If we move to the first question, the procedure, I would not say a procedure. I would say it's a standard and normal process in every M&A deal. So we went through, our advisors went through, and they just applied the agreement we had with the seller. As I already mentioned, and I have no other details, is we agreed with given the significant amount of CapEx in the historic trend of Defense Tech, we agreed between purchasers and sellers an amount as a limit. And then if the extra amount would have been in place, there was a ratio of deductibility. Very, very simple, very clear. The figures of Defense Tech are what they are in the balance sheet. So there is nothing on this subject, as I already answered to Isacco.
Second, the price of the tender offers is not on the table today, so only following the specific stock exchange rules. Once all the steps will be completed, the board or Tinexta will convene again and will come out with the price for exercise for the tender offer. So it's not a matter that I can go through today following this procedure. For the net financial position, again, we agreed with the seller that certain balance sheet position should have been treated as agreed between parties, and this is how we came to this net financial position of EUR 4.9 million. Again, we fully reflect the net financial position. This is the net financial position, and so nothing has been changed.
Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Carlo Maritano of Intermonte.
Good afternoon, everyone. I just have one question on the outlook for Defense Tech. So you indicate a 12% CAGR. I'm not sure I understood the margin trajectory you expect. The 29% is EBITDA margins. In this case, why should the margin be lower compared to the 35% to 40% registered in the last three years? Thank you.
Okay. Thank you for your question. We do expect this as a revenue mix over the period. So nothing specifically different. Yes. For us, it's absolutely not an issue, not a problem. We fully share the plan proposed by the management and also shared with investors. So we are fully aligned on that. And we trust in the company as we are going to exercise our call. And we think we are entering a very attractive business with also potential for synergies with the group.
Okay. I don't see any more questions on the table. So thank you very much for connecting. I'm available for any follow-ups, and I'll reach out to any of you analysts and obviously all the shareholders that need any help in understanding the deal and the next steps. Thank you very much.
Thank you very much. See you.
Thank you. Thank you.
Bye.
Bye.