SEB Completes Acquisition of Paradigm Consulting Group Inc. and
Transcription
SEB Completes Acquisition of Paradigm Consulting Group Inc. and
Smart Employee Benefits Inc. Toronto, Ontario, Canada TSX-V Symbol: SEB SEB Completes Acquisition of Paradigm Consulting Group Inc. and PCGI Consulting Services Partnership Consolidates SEB’s Presence in Western Canada March 6, 2015 – TORONTO, ON: Smart Employee Benefits Inc. ("SEB") (TSX VENTURE: SEB), is pleased to announce that its indirect wholly owned subsidiary, 101270941 Saskatchewan Ltd., has acquired all of the issued and outstanding shares of Paradigm Consulting Group Inc. and all of the issued and outstanding units, directly and indirectly, of PCGI Consulting Services Partnership (collectively referred to as “Paradigm”). As previously disclosed in a press release dated January 29, 2015, the transaction was closed in escrow with an effective date of December 31, 2014, subject to the completion of the amalgamations described below which have now been completed. Due to the fact that the Paradigm acquisition involved the purchase of shares as well as the purchase of partnership units, both directly and indirectly through holding companies of certain of the vendors, various companies were amalgamated to simplify the corporate structure and to enable the business acquired to reside in a single company. The purchaser company, 101270941 Saskatchewan Ltd., was amalgamated with Paradigm Consulting Group Inc., 101275162 Saskatchewan Ltd. (formerly 5677387 Manitoba Ltd. before its continuance into Saskatchewan), Craven Farms Ltd., 101275149 Saskatchewan Ltd. (formerly 4311612 Manitoba Inc. before its continuance into Saskatchewan) and 101271586 Saskatchewan Ltd. The name of the amalgamated company is Paradigm Consulting Group Inc.; and all of the issued and outstanding shares of this company are owned by Somos Consulting Group Ltd., a wholly owned subsidiary of SEB. The various continuances and amalgamations have been completed, the Paradigm transaction documents have been released from escrow and the purchase price proceeds have been paid to the vendors. Paradigm is a very strategic acquisition for SEB, bringing significant government and corporate client relationships along with technical skills and expertise, which allow SEB to compete more effectively in Western Canada, particularly in the areas of healthcare and benefits administration and adjudication. SEB has made significant progress in developing a presence in Western Canada and Paradigm consolidates SEB’s strength, providing local presence and delivery capability to service and manage important client relationships in this marketplace. TRANSACTION TERMS: The purchase price of Paradigm is up to $15,793,436, consisting of firm consideration of $13,427,864 and additional consideration of up to $2,365,572 if certain performance targets are achieved. The “firm consideration” consists of the following: 1) Cash of $9,288,112 (including $1,600,000 of a working capital balance sheet adjustment). 2) Vendor notes in the aggregate principal amount of $1,182,786, with interest accruing at an annual rate of 3% payable quarterly in arrears with one third of the outstanding principal payable at the end of year two and the balance payable at the end of year three. The notes are convertible into SEB shares at $0.50 per share. 3) 5,913,877 SEB shares with a deemed value of $2,956,966. The shares are subject to a 36month contractual escrow, with shares being released every six months in equal amounts following the closing of the transaction. In addition, 1,000,000 share purchase warrants were issued to Paradigm employees as a retention incentive, of which 12,500 warrants were issued to Paradigm’s President and 20,000 warrants were issued to Paradigm’s Vice President of Finance. The majority of Paradigm employees received an Smart Employee Benefits Inc. Toronto, Ontario, Canada TSX-V Symbol: SEB allocation of warrants. All warrants have a 48-month term and an exercise price of $0.50 per share. The warrants vest in equal amounts every six months following the closing of the transaction. The “additional consideration”, payable in cash, consists of up to: 1) $1,774,179 to be paid at the end of year three following closing, subject to meeting a cumulative EBITDA of $8,870,898. 2) $591,393 to be paid at the end of year four following closing, subject to meeting a cumulative EBITDA of $11,827,864. If the cumulative EBITDA targets are reached prior to the three year and four year benchmarks, respectively, the additional consideration will be paid earlier. In addition, Paradigm employees will be entitled to participate in two annual bonus pools: 1) All employees of Paradigm will be entitled to participate in a bonus pool, with the aggregate pool amount calculated as the amount exceeding a benchmark of $2,956,966 EBITDA for Paradigm in each year over a 4 year period from the closing at a rate of 20% of such excess. 2) Senior management of Paradigm shall be entitled to participate in a bonus pool calculated as 5% of the EBITDA of Paradigm. MANAGEMENT COMMENTS: John McKimm, President/CEO/CIO of SEB states "Paradigm’s experience and enviable references add to our growing Canadian presence, particularly in Saskatchewan and Manitoba, both long time innovators of healthcare services. This acquisition is in line with our focus on deepening client relationships in government and healthcare in Western Canada. Paradigm brings both important client relationships and technology expertise that add to SEB’s suite of solutions and services, enhancing SEB’s technology offerings and significantly increasing SEB’s delivery capability to corporate and government sectors in Western Canada. SEB has substantial client opportunities in Western Canada for its technology solutions and the Paradigm acquisition is expected to significantly increase the success of these opportunities. Paradigm’s executive management and employees are very experienced and highly regarded in the marketplace. The acquisition of Paradigm is expected to increase consolidated SEB sales to over $60.0 million annually, and contribute substantially to the overall profitability of the SEB Group. Paradigm has annual revenue of approximately $24 million and a track record of substantial profitability.” Mr. McKimm continues “Healthcare systems and software for benefits management have not kept up with the evolution of technology in other industries. SEB’s focus has been on utilizing our technology expertise and knowledge, in managing and transacting data in other industry sectors, to create high value-added end-to-end software solutions and services which provide healthcare and benefits clients with more cost-effective and flexible technology solutions, enhanced automation, reduced error rates and allow the real-time detailed reporting required to make informed business decisions. Paradigm enhances SEB’s delivery and support of these solutions in the marketplace, particularly in western Canada.” Mark Hustak, President/CEO of Paradigm states “Having grown unique specialties in healthcare IT and managing and transacting big data, SEB has the ability to significantly deepen our expertise in our current markets and beyond. With SEB, we are poised for delivery of high value-add solutions that satisfy customers’ most relevant needs in the growing demand for immediate Business Intelligence around Big Data.” He continues, “Paradigm has been evaluating its options during the last year to expedite our growth prospects. Over the past 23 years, Paradigm has provided management consulting, change management and application and IT services to corporate and government clients. Paradigm has over 150 billable consultants, mostly employees, who service a legacy client base where the top 10 clients have an average engagement history of over 12 years. Paradigm has unique specialty practices and strong client relationships in healthcare, government, technology integrators, insurance and utilities. The SEB Group gives Paradigm the opportunity to Smart Employee Benefits Inc. Toronto, Ontario, Canada TSX-V Symbol: SEB incorporate advanced software and solutions in its sales mix. These solutions will have significant value for the majority of Paradigm’s client base. SEB has made significant progress in establishing a footprint in Western Canada and Paradigm gives SEB the local presence and delivery capability to expedite and expand this footprint. The combination of Paradigm and SEB significantly enhances the opportunity for both companies to become a major competitor in Western Canada in providing technology to clients, particularly solutions for healthcare and benefits and claims management.” PARADIGM’S STRATEGIC FIT WITH SEB: Healthcare: Paradigm has provided IT services and ongoing support on numerous healthcare projects including electronic medical records, payor/provider registration, system integration expertise, insurance applications, acquisition integration projects and has key vendor relationships with numerous government and corporate clients in this sector. Clients include eHealth organizations, Ministries of Health, and Regional Health Authorities to mention a few. Public Sector: Paradigm maintains long term vendor relationships within multiple areas of government and government organizations, including crown corporations. A number of these organizations are excellent opportunities for implementation of SEB technology solutions. Major projects have been completed for provincial government ministries, provincial crown corporations and the Government of Canada. The specific areas include: driver and vehicle licencing and insurance, justice, social services, education, agriculture, energy and resources, liquor retail and licencing, gaming, and land titles. Insurance: Paradigm has been involved in multiple technology projects in the insurance industry and has extensive ongoing client relationships. A full range of services was provided and major projects have been completed for national and international insurance companies and financial services companies headquartered in Manitoba and Saskatchewan. The specific business areas include: group health insurance, individual life insurance, casualty insurance, crop insurance, vehicle insurance, and investment portfolio management. SEB technology solutions and expertise have significant value added for automating numerous insurer business processes. Technology Expertise: Paradigm has key specialty skill sets and experience which are critical to managing the systems integration required to connect legacy data systems to new technology solutions while allowing seamless connectivity between the two environments. Most healthcare and benefits administration processes require this connectivity and systems integration expertise. Client References: Paradigm has numerous client references which carry substantial weight in responding to RFPs in both the government and corporate sectors. References are a critical ingredient of meeting RFP mandatory requirements as well as an indicator of successful projects. Delivery and Support: Paradigm provides local expertise and delivery capabilities along with ongoing support infrastructure to manage existing and future SEB client relationships in Western Canada. This is particularly critical with client outsourcing projects and fits well with SEB’s “SaaS” (software as a service) business model. ABOUT PARADIGM: Paradigm has a 23-year history of providing management and information technology consulting services to healthcare, insurance, financial services, public sector, telecom and energy clients. With over 150 billable consultants, primarily employee based, Paradigm is a market leader for delivering management consulting, portfolio/program/project management and application technology services to an enterprise level client base. Paradigm has a very deep portfolio of IP for its key client verticals which enables accelerated delivery of projects and maintains long term client relationships. Paradigm’s staff has very strong accreditations in numerous technology disciplines which differentiate them in the marketplace. The majority of Paradigm’s employees are shareholders. The “senior partner team” of six has over 180 years of combined industry expertise. Paradigm’s services are as follows: Smart Employee Benefits Inc. Toronto, Ontario, Canada TSX-V Symbol: SEB Portfolio, Program & Project Management: This area includes Consulting Services, Program and Project Management, Portfolio Management and Project Management Office. Paradigm is widely known for the Project Management services it provides to its customers. Not only can Paradigm provide Project Management resources that effectively manage the time, scope, and quality of projects, but also Paradigm is well known for rescuing projects that are off track, managing high profile and high-risk projects, and managing multiple projects concurrently. Paradigm consultants have experience helping customers establish a Project Management Office (“PMO”) as well as maintaining, assessing and recommending improvements to the PMO once it is in place. Business Analysis: Paradigm provides a full range of Business Analysis services to support its customer’s business. These services integrate with related disciplines such as Project Management, Management Consulting, and IT Service Management to provide a full life-cycle solution to meet customer’s business needs. Business Analysis identifies business needs and determines solutions to business problems. Solutions often include a systems development component, but also consist of process improvement or organizational change. Business Process Consulting: Paradigm has three areas of expertise within its Business Process Consulting offering: Business Planning, Business Process Analysis and Design, and Continuous Improvement Process including Lean Six Sigma. Paradigm has extensive experience consulting in Business Process Management. Its consultants have worked with customers to implement BPM within their organizations including analyzing and documenting existing business processes, developing and implementing BPM plans, managing the changes and mentoring staff through the change process. Management Consulting: The Management consulting services consist of four areas of expertise: Strategic Planning, Efficiency Reviews, Organizational Change Management, and Procurement Service. Its consultants have an average of 18 years’ experience in the information technology sector with expertise in a variety of industries including public sector, healthcare, insurance, utilities, telecommunications, and banking. Training: Paradigm offers its customers Best Practice accredited training, including PRINCE2®, MSP®, P3O®, MoR® and MoP®, as well as Agile Project Management. Paradigm offers both public and private courses for customers. Independent Project Review: Paradigm has a proven methodology for Project, Program and Portfolio Health checks, and it has provided this service for many of its Public Sector clients. Specifically, it has been a service to either perform: 1) a readiness assessment on the organizations’ aptitude for initiating a project/ program or portfolio 2) a health check of the Project Management Office, or the health of a specific project or 3) a rescue of the potentially troubled project by implementing corrective action. Application Development: Paradigm’s Application Services include Application Architecture, Application Design and Development, and Application Support. It provides a full range of business application development and application management services. Its specialists provide services in a variety of hardware and software environments, following formal delivery guidelines and accepted methodologies. Paradigm is committed to following the standards for system development set out in the Software Engineering Institute’s Capability and Maturity Model for software, and it actively pursues other improvement initiatives, including Software Configuration Management, and Software Quality Assurance practices. Technology Management: This service offering is comprised of the following areas of expertise: Architecture, IT Operations Design, and ITSM Education Services. Paradigm offers a complete range of information technology architecture services as standalone engagements or as a component of a project or broader services initiative. Smart Employee Benefits Inc. Toronto, Ontario, Canada TSX-V Symbol: SEB ABOUT SEB: SEB’s core expertise is managing specialized Big Data environments, of which healthcare is a major focus. SEB is a technology company providing, via a SaaS business model, software, solutions and services specializing in managing group benefit solutions and healthcare claims processing environments for corporate and government clients. Health Claims Processing alone is a $60.0 plus billion industry, of which over $37.0 billion is employee group benefit plans and over $25.0 billion of other healthcare benefit claims (e. g. workers’ compensation claims, travel benefits, various federal and provincial government programs, dental associations, drug associations, etc.). In the employee group benefits industry, SEB operates as a Third Party Administrator and Insurance Brokerage utilizing its software platform to provide “totally hosted PCI compliant supply chain solutions” for managing the complete group benefits business processes between insurers, clients, brokers, consultants, technology service providers and healthcare service providers. In healthcare claims processing, SEB also operates as a systems integrator utilizing its technology platform together with other technologies to provide customized, fully integrated solutions for specialized environments (e.g. travel claims, student benefits, hospitals, unique government applications, etc.). The technology and expertise deployed in this area also allows SEB to provide other related supply chain, systems integration and human resource solutions and services to the same clients. Forward-Looking Statements: This news release is intended for information purposes only. Statements made in this news release may contain "forward looking" information about the company's future business prospects. These statements while expressed in good faith and believed to have a reasonable basis are subject to risk and uncertainties that could cause actual results to differ materially from those set forth or implied by such forward looking statements. Investors should consult a professional advisor before making any investment decision. For further information about SEB, please visit www.seb-inc.com. MEDIA AND INVESTOR CONTACTS: Smart Employee Benefits Inc. John McKimm President/Chief Executive Officer (416) 460-2817 [email protected] Shelly Frank Vice-President, Marketing (888) 939-8885 x 358 [email protected] First Canadian Capital Corp. Dan Boase 416-742-5600 or 1-866-580-8891 [email protected] Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.