Proving the Business Case for the Internet of Things

Novatel acquires Digicore for $87m to boost telematics and asset tracking offerings

Steve Rogerson
June 30, 2015
 
Novatel Wireless is buying South African company Digicore Holdings for US$87m to support its growth plans in the logistics and telematics markets. The acquisition will add 325,000 Ctrack subscribers to the California company’s growing SaaS base.
 
Novatel Wireless provides IoT products and services and invented Mifi technology. It has signed a definitive agreement to acquire 100 per cent of the issued share capital of Digicore Holdings, a provider of M2M communications and telematics products, for 4.40 South African rand per share, making an aggregate purchase price of approximately US$87m based on current exchange rates. Irrevocable undertakings have been signed by holders of 58 per cent of Digicore's outstanding shares to vote in favour of the transaction.
 
Novatel Wireless has worked closely with Digicore since 2013 to commercialise an end-to-end global software-as-a-service (SaaS) platform. The acquisition will unify Novatel Wireless' hardware with Ctrack, a global telematics SaaS offering for the fleet management, user-based insurance and asset tracking and monitoring markets. This, combined with the professional services offered by Novatel Wireless' recently acquired Feeney Wireless, delivers what is claimed to be the market's first full stack for the global transportation industry.
 
"This combination is the result of a long-standing partnership between the two companies," said Alex Mashinsky, CEO of Novatel Wireless. "As a result of this relationship, we've already gone through an arduous process of integrating Novatel Wireless hardware into Digicore's SaaS platform to create the industry's most complete IoT stack. These efforts are now bearing fruit as our successful joint venture has validated that the market demands a true end-to-end solution comprised of a comprehensive hardware portfolio, platform and cloud services, and integration and support."
 
As a result of the acquisition, it is anticipated that approximately 980 Digicore employees globally will join Novatel Wireless. The combined company hopes to be positioned to create a foundation for developing and marketing comprehensive services for the commercial telematics industry. The collective vision is to simplify the delivery of telematics from device deployment to big data collection, analytics and reporting.
 
"This acquisition will allow Novatel Wireless to continue to accelerate towards the number one position in the internet of things through organic growth, strategic acquisitions and increasing quarterly SaaS activations," Mashinsky said. "None of our competitors can match the combination of hardware expertise that Novatel Wireless has accumulated and the platform depth and analytics capabilities that Digicore has developed on a global scale."
 
The combination of Digicore, Feeney Wirelessand Novatel Wireless is expected to push Novatel Wireless into a leading position with over 5000 estimated global corporate customers. Together, Digicore's Ctrack offering, Feeney's professional services and Novatel Wireless' hardware devices are used in 54 countries across North and South America, Africa, Asia-Pacific and Europe.
 
The transaction is expected to shift Novatel Wireless' revenue base considerably. During its 2014 fiscal year, Digicore's gross margin exceeded 65 per cent and recurring revenues accounted for more than 65 per cent of total revenues, as reported by Digicore pursuant to International Financial Reporting Standards.
 
With Digicore's platform, an estimated 325,000 telematics-focused subscribers are expected to be added to the company's base of SaaS subscribers that were acquired from Feeney.
 
With the completion of this acquisition, the company expects to continue to diversify its business model with hardware, SaaS, managed services, airtime and professional services across verticals in telemetry, control and automation, and now telematics with Digicore.
 
The combination is expected to enable the companies to develop new markets in Latin America and Asia-Pacific. Together they intend to provide mobile broadband, telematics hardware, cloud services, managed services, analytics, airtime and logistics.
 
Each company's board of directors has approved the proposed transaction, which is expected to close later this year. The transaction is subject to approval by the shareholders of Digicore, receipt of regulatory approvals and other customary closing conditions. In addition, the stockholders of Novatel Wireless will be asked to approve the use of proceeds from its recent offering to fund the acquisition.