Avigilon Loads Up With $200 Million More
By John Honovich, Published Apr 08, 2015, 12:00am EDTEvidently they are not done yet.
In the past 18 months, Avigilon raised $169 million, then bought nearly $100 million in patents, VideoIQ for $32 million, and a building for $42 million.
Now, Avigilon has secured another $200 million USD in funds.
In this note, we examine the details and what this means for Avigilon's continued expansion.
The $200 Million
Unlike the past 2 raises which were equity, this time Avigilon is securing debt, specifically a $200 million credit facility. It has a 3 year term and an effective interest rate of ~3%. It is divided into 3 portions: $100 million for acquisition, $60 million for working capital and $40 million for the new Vancouver building.
Most importantly, on the acquisition side, Avigilon is already drawing down $80 million to cover the OV acquisition costs, which significantly builds back Avigilon's cash reserves. Also important, the deal includes an optional $50 million additional (which would bring the total to $250 million) for more acquisitions.
Barriers to Equity
Investors have lost money on Avigilon's last 2 fund raises. In November 2013, Avigilon raised $69 million at $24.10 per share. In March 2014, Avigilon raised $100 million at $29 per share. Today, Avigilon's shares trade at $22.11 per share.
Because of the poor performance and the stock's volatilty in the past year, we suspect it would have been quite hard for Avigilon to raise this level of funding via equity.
Pros and Cons of The $200 Million
This frees up a lot of money for new acquisitions. At the end of 2014, Avigilon had cash and cash equivalents of $73.1 million. Now they have the $80 million 'back' from the OV purchase, plus $20 million more immediately available in credit for acquisitions, plus the $50 million option. All of this lets Avigilon be aggressive in acquiring even fairly sizeable security or surveillance companies.
Also positive is that the cost is quite low, especially since it includes funding for something as risky as patent enforcement.
The big negative is the 3 year term. If things go well for Avigilon, they can easily extend the credit line. If things go really well, they can raise equity. However, if Avigilon hits problems or there is a recession, Avigilon will have difficulties funding this, which could put more pressure on the business.
Who Will They Buy Next?
For now, though, this is a pretty clear indicator that Avigilon will continue to be aggressive and is likely to buy more companies in the next year.
