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Highlights

  • Dromana has executed an exclusive agreement to acquire 100% of Australian cloud computing service provider, Cloud Central Pty Ltd (“CloudCentral”).
  • CloudCentral has four cloud data presences located within Australian Tier-III secure data facilities located in Canberra (2), Sydney and Melbourne with excess capacity to grow revenue.
  • CloudCentral’s platforms and services are underpinned by unique intellectual property developed over four years, validated by live customer deployment and numerous Government grants and awards.
  • Following completion of the CloudCentral acquisition, founder Mr Kristoffer Sheather to become Managing Director and experienced IT entrepreneur and former iiNet Director, Mr Andrew Milner, will become a Non-Executive Director.
  • The all-scrip offer is subject to Dromana shareholder approval. Purchase consideration is split between an initial issue of 275M fully paid ordinary shares and additional shares to be issued upon achievement of performance milestones linked to revenue and EBITDA.
  • The acquisition of Cloud Central remains subject to certain conditions precedent, and is expected to be completed in June 2014.
  • Dromana is undertaking a pre-acquisition placement of $400,000 at $0.005 per share with placement participants to be offered a one (1) for two (2) free option exercisable at $0.01. Hartleys Limited is Lead Broker to both the placement and $3.5m re compliance raising.

Background

Dromana Estate Limited (ASX.DMY) (“Dromana” “DMY“) is pleased to announce that it has executed a binding term sheet to acquire, subject to conditions precedent specified below, 100% of the issued capital in Australian based cloud computing infrastructure and service provider, Cloud Central Pty Ltd (“CloudCentral or the Company”).

Founded in 2010 by Chief Executive Officer Mr. Kristoffer Sheather, CloudCentral is an established cloud computing business providing wholesale Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) services directly to IT solution providers and Software-as-a-Service developers. The Company’s infrastructure services are underpinned by unique intellectual property which has been validated and recognized in awards and grant funding from the ACT Government, Australian Information Industry Association (AIIA), Canberra BusinessPoint and Longhaus. The proprietary integrated cloud services platform is based upon low-cost commodity hardware which enables the company to rapidly deploy new services at low-cost, delivering benefits to IT vendors and their customers.

CloudCentral is a 100% Australian owned and operated with an existing point-of-presence in four data centres in the Australian Capital Territory, New South Wales and Victoria. As an Australian owned and hosted service provider, CloudCentral firmly assures Australian sovereignty of data and fully complies with the revised Australian Privacy Principles set to be released in March 2014.

Completion of the acquisition will result in a change of company name to CloudCentral Limited and the appointment of two new directors, founder of CloudCentral, Mr. Kristoffer Sheather as Managing Director and former iiNet and L7 Director Mr. Andrew Milner as Non Executive Director. Mr. Milner was the founder of one of Australia’s first commercial ISPs in 1995, subsequently vending that business into the iiNet Ltd Initial Public Offering in 1999, after which he spent 9 years with iiNet in a variety of executive and non-executive Director roles. He was also the co-founder and Chairman of L7 Solutions, one of WA’s fastest growing systems integrators, with a turnover of $55m at the time of its acquisition by Amcom Telecommunications in 2011. Dromana’s current Chairman Mr. Gabriel Chiappini will remain as Chairman.

Dromana has appointed Hartleys Limited as Lead Manager to a pre-acquisition capital raising of $400,000 through the placement of 80,000,000 shares at an issue price of $0.005 per share and with placement participants to be offered a one (1) for two (2) free option exercisable at $0.01 within four years of issue. The Placement shares will be issued in two tranches with the first tranche pursuant to the ASX Listing Rule 7.1 15% capacity of Dromana and the second tranche subject to shareholder approval at a General Meeting of Dromana shareholders to be convened shortly. The funds raised are intended to be used to meet transaction costs associated with the acquisition of CloudCentral and to provide loan funds to CloudCentral for working capital purposes.

Acquisition Terms

The key terms of the acquisition to acquire 100% of the issued capital of CloudCentral, which is subject to approval by Dromana shareholders, include the following:

  • Binding term sheet with CloudCentral and its major shareholder Kristoffer Sheather;
  • Provision of an unsecured loan of up to $225,000 to CloudCentral. In the event the acquisition is not approved by Dromana shareholders, the loan will be repayable upon the earlier of six (6) months or the date that CloudCentral next completes a capital raising;
  • All existing convertible notes on issue by Dromana to be converted into 100,000,000 fully paid Dromana shares (pre-consolidation) at $0.005 per share;
  • Issue of 275,000,000 fully paid ordinary shares (pre-consolidation) to CloudCentral shareholders;
  • Issue of 23,500,000 performance shares (post-consolidation) to CloudCentral shareholders and new Board and executive members on the following conversion terms:

Tranche 1: 4 million post-consolidation performance shares* that convert on a one for one basis to ordinary shares if A$1.5 million annualised revenue (based on a 6 month reporting period) is achieved by the CloudCentral business by 31 December 2016;

Tranche 2: 10 million post-consolidation performance shares* that convert on a one for one basis to ordinary shares if A$5.0 million in annualised sale revenue (based on a 6 month reporting period) is achieved by the CloudCentral business by 30 June 2017 (with pro-rata conversion if 50% or more of milestone is achieved); and

Tranche 3: 9.5 million post-consolidation performance shares* that convert on a one for one basis to ordinary shares if A $5.0 million in annualised EBITDA (based on a 6 month reporting period) is achieved by the CloudCentral business 30 June 2017 (with pro-rata conversion if 50% or more of this milestone is achieved).

*based on 20 cent post-consolidation share price.

  • Satisfaction of various conditions precedent by 15 August 2014 (unless extended by mutual agreement), including:
  • DMY being satisfied, to its sole satisfaction, with the completion of its due diligence investigations on CloudCentral within 14 days;
  • DMY obtaining all necessary regulatory and shareholder approvals under the ASX Listing Rules, Corporations Act 2001 (Cth) (Corporations Act) or any other law to allow DMY to lawfully complete the acquisition of CloudCentral. This will include a re-compliance with Chapters 1 & 2 of the ASX Listing Rules;
  • DMY undertaking a consolidation of its securities at a ratio to be determined as necessary to re-comply with ASX Listing Rules;
  • DMY obtaining an independent expert’s report to discharge its obligations under Section 611(7)(b) of the Corporations Act;
  • DMY undertaking a capital raising pursuant to a prospectus to raise not less than $3.5 million on a post-consolidation basis at $0.20 per share with a free attaching option on the same 1 for 2 basis as the options to be issued with the pre-acquisition capital raising (“Prospectus Offer”);
  • the Convertible Notes on issue by DMY are fully converted into 100,000,000 DMY Shares, at $0.005 per DMY Share on a pre-Consolidation basis following the approval of DMY shareholders at the general meeting and prior to ASX readmission;
  • Mr. Kristoffer Sheather entering into an executive services agreement with the Company or DMY for at least 2 years on terms consistent with standard terms for executives in Australia;
  • Escrow arrangements documented in accordance with ASX requirements for all consideration securities; and
  • Execution of share sale agreements with the minority shareholders of CloudCentral, or acquiring their shares pursuant to the drag along provisions of CloudCentral’s shareholders agreement.
  • Board restructure with the appointment of two new directors, founder of CloudCentral, Mr. Kristoffer Sheather as Managing Director and former iiNet and L7 Director Mr. Andrew Milner as Non Executive Director. Mr. Gabriel Chiappini will remain as Chairman of Dromana, and Dromana will procure the resignation of current board members, Mr. Jerko Zuvela and Mr. Geoffrey Bell.

The acquisition will constitute a change in the nature and/or scale of the activities of Dromana in accordance with Chapter 11 of the ASX Listing Rules. As such, Dromana will be required to re-comply with the admission requirements of Chapters 1 & 2 of the ASX Listing Rules.

Change of Name

As part of the transaction, Dromana anticipates changing its name to “CloudCentral Limited”.

Notice of Meeting

Dromana will shortly despatch to shareholders a detailed notice of meeting seeking approval for the transaction. The notice of meeting will contained detailed information regarding the business of Cloud Central and will also include an independent expert’s report on the fairness and reasonableness of the transaction on Dromana shareholders.

Indicative Capital Structure

The indicative capital structure on a pre-consolidation basis it outlined below.

<td”> 605,605,764

90,000,000

ASX:DMY Shares

Options

DMY existing

150,605,764

50,000,000

Convertible Note conversion

100,000,000

Placement ($400k @ 0.5c with 1:2 option)

80,000,000

40,000,000

Cloud Central upfront vend

275,000,000

Total (i) (ii) (iii)

i)                23.5m performance rights/shares linked to milestones to be issued on a post consolidated basis

ii)               DMY is proposing to undertake a capital raising of min $3.5m and max of $5m

iii)              Corporate transaction fees to be issued – 100m options (ex 1c) pre consolidation basis and 750,000 shares on a post consolidation basis.

Indicative Timetable

The indicative timetable for the transaction is set out below, noting that the Company reserves the right to alter the timetable if required.

Event

Date

Execute agreement for acquisition of Cloud Central

18 March 2014

Lodge Notice of Meeting to approve acquisition of Cloud Central

23 April 2014

General Shareholder Meeting to approve working capital

28 April 2014

Completion of working capital placement

29 April 2014

Lodge Prospectus with ASIC

22 May 2014

General Shareholder Meeting to approve acquisition of Cloud Central

23 May 2014

Prospectus offer closes

5 June 2014

Despatch Holding Statements

13 June 2014

Requotation of shares on ASX

14 June 2014