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Kaleyra: mGage Acquisition Analysis, Including Conversation With CEO Dario Calogero

Mar. 01, 2021 12:56 AM ETKaleyra, Inc. (KLR)BX66 Comments
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  • Kaleyra on Feb 19th announced the acquisition of mGage, an enterprise messaging provider majority owned by Blackstone for $215 million.
  • The CEO of Kaleyra was kind enough to answer a few of my questions regarding the deal that were not entirely clear in the acquisition conference call.
  • The direct connection to all 4 US telecom carriers is a prized asset held by only 3 other companies and the margin profile of Kaleyra is set to improve dramatically.
  • The post-merger company will instantly be much closer to the 40/30/30 US, EU & APAC/ROW revenue goal of the company and will be rife with cross and upselling possibilities.
  • I am keeping my S/EV ratio target of 5, however with the added sales of mGage purchased at a shocking 1.26 S/EV, this allows my fair value target to increase all the way to $46.

In this article, I would like to discuss Kaleyra's (NYSE:KLR) recently announced acquisition of enterprise messaging company mGage from majority holder, Blackstone Group (BX) and go over the implications for the company moving forward.

If you are not familiar with Kaleyra, the Italy-based multinational CPaaS company, I would recommend the following primer articles from myself here and from fellow Seeking Alpha contributor Matthew Zeets here before reading on.

The mGage Deal Specifics

On February 19, shareholders of Kaleyra such as myself awoke to news of the company acquiring multinational enterprise messaging company mGage in a truly transformative $215 million dollar deal.

mGage, is a best-of-breed mobile messaging solution allowing enterprise clients across a diverse range of end-markets to effectively engage with their customers through all mobile channels for a variety of use cases. mGage serves its customers through its cloud-based enterprise mobile messaging platform Communicate Pro, their API solution Connect, as well as Omnichannel mobile messaging offering such as SMS, MMS and RCS.

To fund the acquisition of mGage, the company will issue $200 million of aggregate principal amount senior unsecured convertible notes due in 2026, with certain institutional investors and $125 million of gross proceeds from the issuance of 10 million shares of Kaleyra common stock in a Private Investment in Public Equity (PIPE) transaction, with institutional investors priced at $12.50.

The consideration to mGage shareholders will consist of cash in the amount of $195 million and 1,600,000 shares of Kaleyra common stock. In doing the basic math of the transaction, mGage was purchased at a rather unbelievable price of 1.26 forward 2021 S/EV and an even more attractive 6.98 adjusted 2020 EBITDA figure. The deal is expected to close early in Q2.

Source: The trusted CPaaS - Kaleyra website

Those are the basics, now let us get to the

This article was written by

Confoundedinterest profile picture
I work in the financial and property management industry for a well known, publicly traded "mini Berkshire" Insurance company. I focus on portfolio structure, value, reasonably priced growth, tech and biotech spaces. I passed the series 6 and 7 exams at age 18 but do not at this time have active licenses.My passion for investing and personal finance education began at a very early age. I opened my first brokerage account at the age of 12 and have invested through crashes, crises, recessions and bubbles. I have made many mistakes in both my personal and investing lives, however, each mistake I have made has taught me valuable lessons on my journey, both in life and towards financial independence. As of March 2023, my total portfolio has compounded at 10.2% per year since 1993, beating the S&P 500's return of 9.87% over the same time period. I do not currently hold active licenses and I am not a financial advisor and do not give out or publish investment advice. Articles I write are my opinion only and are not solicitations, please seek guidance from a licensed financial advisor before investing in any security. Opinions expressed in my articles are my own and do not reflect or indicate any positions or opinions held of my primary employer.

Analyst’s Disclosure: I am/we are long KLR, TWLO, T, VZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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