Close the Loop to acquire ISP Tek Services
March 17, 2023
The acquisition will provide the Company with significant consumer and commercial electronics remanufacturing and technological capabilities, a considerable US market sales and trading presence, and extensive distribution networks.
Close the Loop Limited (Close the Loop or the Company), an end-to-end solutions provider from design and manufacturing, through to collection and recycling of products, announced it has entered into an agreement to acquire 100% of ISP Tek Services LLC and Captive Trade Corp., US-based electronics refurbisher and trading platform businesses based in Southlake, Texas, USA, for a total consideration of up to US$66 million (€62 million).
The company also said that the acquisition will also add reuse capabilities to the Company’s portfolio and further strengthen its service offering to original equipment manufacturers (OEMs), supporting sustainability and circular economy initiatives.
ISP Tek Services LLC. and Captive Trade Corp. are refurbishers and distributors of consumer electronics within a blue-chip customer base that has helped deliver phenomenal growth in its last two years of trading. ISP Tek Services LLC is an HP Remarketing Partner and Authorised Distributor, as well as a third-party refurbisher (TPR) for Microsoft, Samsung, LG and other industry-leading manufacturers. It refurbishes high volumes of off-lease or previously-owned computers as well as inkjet, LaserJet and commercial printers. Products are obtained from OEM’s return route channel and mass retailer returns, plus a variety of different sources including excess inventory, bulk purchases, customer returns, cancelled orders, damaged products, and demo products.
ISP Tek Services and Captive Trade Corp recorded US$32 million (€30 million) of revenue in CY21. ISP Tek Services founders, Sammy and Dania Saloum, have over 30 years of industry experience in consumer electronics and the returns lifecycle management space, working with fortune 500 companies across the US. They will continue to manage the ISP Tek Services business and assist the existing Close the Loop management team with the global expansion of ISP Tek Services.
Close the Loop Group Chief Executive Officer Joe Foster said: “The acquisition of ISP Tek Services delivers on our strategy of focusing on resource recovery, particularly in the world’s largest capital market, North America. This acquisition is expected to deliver approximately 100% earnings per share accretion to the Group on a historical annualised basis. ISP Tek Services is a Tier 1 full consumer electronics life-cycle management business with a keen focus to provide US-based remanufacturing capabilities for market-leading OEMs, which provides the Group with significant opportunities to expand in further regions around the world. We do not, however, expect to make any further acquisitions in the near future due to our already strong global foothold on the circular economy.”
Sammy Saloum, Founder and CEO of ISP, said: “We are excited about the opportunities that the combined Group can deliver in the remanufacturing space globally. With our complimentary service offerings, the Group can provide Tier 1 manufacturers with a responsible and secure end-to-end solution to manage their product lifecycles closer to home. Considering the chances of supply-chain instability and due to the sensitivity of data security of enterprise, corporate and consumer devices, bringing returns refurbishment closer to the original point of sale is a high priority for OEMs. The combined service offering allows the Tier 1 manufacturers to deliver on their circularity pledge and remanufacturing targets.”
Acquisition Terms
- CLG to pay US$35 million (€33 million) in cash upon closure of the transaction, which is expected to be on or around 30 April 2023.
- US$11 million (€10 million) of CLG shares to be issued at settlement based on the 30-day VWAP. ISP Tek Services founders Sammy and Dania Saloum will be substantial shareholders of CLG following the transaction.
- 3 years, 4% interest bearing convertible note of US$7.5 million (€7 million) that can be converted into CLG shares at a rate of 74 cents or repaid in cash at the discretion of the vendor at the expiry of the note term.
- 3 years, 4% interest bearing convertible note of US$7.5 million (€7 million) that can be converted into CLG shares at a rate of 74 cents (€0.69) or repaid in cash at the discretion of the purchaser at any time during note term.
- Earnout of up to US$5m if CY23 EBITDA exceeds US$12 million (€11 million), with the additional US$5 million (€4.7 million) committed to be paid within five working days of the audited financial report being published.
- Acquisition of the operating business on a cash-free and debt-free basis including infrastructure.
- Inventory on consignment paid for at cost as sold post sale.
And in additional news, Close the Loop has acquired the remaining interest of ClozDloop BV through a share swap. Close the Loop will issue 2 million shares in exchange for the 20% of equity it did not own in its Belgian operations.
Close the Loop Group Chief Executive Officer Joe Foster said: “This will allow Close the Loop to accelerate its investment into its European operations and expand the ISP business via the ClozDloop European footprint.”
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