Shares of Pareteum Corp. (OTC:TEUM) fell as much as 15.8% early Tuesday then settled to close down 7.9% after the cloud software platform company announced an all-stock agreement to acquire mobile connectivity and location data specialist iPass (NASDAQ: IPAS).
More specifically, iPass shareholders will receive 1.17 shares of Pareteum common stock for every share of iPass they own, valuing iPass at just over $21 million as of yesterday's close. iPass, for its part, closed up 18.1% today.
Of course, today's pullback for Pareteum -- caused by the dilutive nature of the acquisition -- predictably dampens that value for iPass investors. But the companies stressed the positive aspects of their impending combination.
Pareteum president Denis McCarthy stated:
Pareteum has enjoyed a solid partnership with iPass over the past year and our mutual view on connectivity and mobile enablement made it easy to see that we could grow our business and accelerate our mission together. Our integration with iPass extends not only Pareteum's customer base, but also our portfolio of services. Customers will now be able to use the Pareteum Global Software Defined Cloud to access premium wireless and Wi-Fi services, and experience location data analytics for a truly immersive experience.
The merger is not subject to the approval of iPass stockholders. But assuming all goes as planned with the necessary regulatory approvals and the tender of a majority of outstanding iPass shares, it should close in the first quarter of 2019. After that, Pareteum expects the purchase will add roughly $5.5 million of adjusted (non-GAAP) earnings in the first full year while providing annual cost synergies of more than $15 million. In the meantime, investors should expect iPass stock to remain tethered to the share-price movements of Pareteum.