Strax divests Gear4 brand to ZAGG for MEUR 35
STRAX has divested Gear4, mobile phone case protection brand, to ZAGG for MEUR 35 with potential additional payments of up to MEUR 9 based on 2019 sales development. The divestment is a share-based transaction, with US-based ZAGG, acquiring all outstanding shares in Gear4 Hong Kong Ltd, a wholly-owned subsidiary of STRAX. The value of the transaction is MEUR 35 and is based on the 2018 forecasted Gear4 sales generated by the STRAX group of companies. Eighty percent of the purchase price will be paid in cash and 20% will be paid in shares in ZAGG, which is listed on the Nasdaq US stock exchange. MEUR 26.5 will be paid in cash at completion with MEUR 5 of the total purchase price held back in escrow for five months and MEUR 3.5 for 18 months. The effective date of the transaction is 30 November 2018. The transaction is based on a cash and debt-free basis, and the initial cash flow impact of STRAX will equal the initial purchase price less the hold-back of MEUR 8.5. The shares received as part of the purchase price will be subject to a customary 12-month lock-up period, whereby the shares cannot be freely sold or transferred. The shares can be sold or distributed to STRAX shareholders after the lock-up period and release from hold-back. STRAX will continue to distribute Gear4 products in several markets, including the UK, where Gear4 enjoys a market-leading position in the mobile case category. While the transaction will negatively impact STRAX's consolidated annual sales by MEUR 20-25, it will reduce headcount by 17 FTEs and OPEX by 8-10%, therefore mitigating the EBITDA impact on a consolidated basis.