Adderton's Mobile X Global gets $20M in equity financing
MINNETONKA, Minn. – Electro-Sensors, Inc. (Nasdaq: ELSE), a leader in industrial monitoring systems, and Mobile X Global, Inc., one of the world's first connectivity-as-a-service companies, announced today that they have entered into definitive agreements to merge and re-name the combined company Mobile X Global, Inc.
Mobile X Global, Inc. will launch Mobile X, a new wireless brand positioned to disrupt the wireless industry. The merger partners also expect Mobile X Global's cloud-native platform to enable synergies between Mobile X and Electro-Sensors' wireless industrial sensor business.
The definitive merger agreement and related transactions have been approved by each company's board of directors and are subject to approval by the shareholders of each company. The directors, officers, and major shareholders of each company, who collectively own a majority of the shares of each company, have entered into agreements obligating them to approve the transactions.
Shares of the combined company are expected to continue to trade on the Nasdaq Capital Market under the ticker symbol "MOBX" upon closing of the merger, expected in the third quarter of 2022.
Launch of Mobile X
In October 2021, Mobile X Global announced a network access agreement to enable the launch of a new AI-powered mobile business for wireless customers. The company will use its proprietary CaaS-AI (Connectivity-as-a-Service-AI) cloud-native platform, XO.1, and its network agreement, to provide personalized wireless data, voice, and messaging services, initially to customers nationwide across the U.S., with a commercial launch expected later this year. The company expects to further expand internationally under the Mobile X brand, leveraging the XO.1 platform capabilities to create a seamless global connectivity experience for its customers.
Mobile X intends to employ artificial intelligence, machine learning, and real-time usage information to learn each customer's unique connectivity requirements and provide optimized individual pricing, supported by a premier app-enabled experience. The seamless experience and potential cost savings for the majority of customers are expected to lead the industry, enabling customers to pay only for the services they use. The XO.1 platform will allow customers to seamlessly switch across multiple global networks, with one number and one service that extends beyond borders.
Merger Structure and Ownership
After the merger, Mobile X Global shareholders are expected to own approximately 76% of the combined company, Electro-Sensors shareholders approximately 11%, and new equity investors approximately 13%, all based on current ownership of the two companies and $20 million of new equity financing on the terms in a commitment letter described below. In addition to their continuing interest in the combined company, Electro-Sensors shareholders as of a record date to be determined before the closing will receive special cash dividends expected to total approximately $18 million, with the actual amount of the dividends subject to adjustment based on the transaction expenses, working capital balance, and any indebtedness of Electro-Sensors at closing.
Cash dividends of $18 million would be approximately $4.83 per fully diluted share of Electro-Sensors, whose closing price on June 10, 2022, was $4.85. In addition, the continuing ownership of Electro-Sensors' legacy shareholders will give them the opportunity to participate in the long-term value to be created by the combined company through Mobile X's planned disruptive entry into wireless communications, synergies expected from enhancing Electro-Sensors' wireless sensor business with the capabilities of Mobile X Global's XO.1 platform, the increased scale of the new organization, and the sharing of best practices.
In connection with the merger, a third-party institutional investor has entered into a commitment letter with Mobile X Global to provide equity financing of up to $20 million upon closing of the merger, subject to diligence and definitive agreements satisfactory to the investor, including an agreement for a $50 million equity line of credit to be provided by the investor. The equity line of credit will provide significant additional liquidity, at the option of Mobile X Global.
Electro-Sensors Voting Agreement and Special Meeting of Shareholders
In connection with the execution of the merger agreement, Electro-Sensors' directors, officers, and major shareholders, who collectively own a majority of Electro-Sensors' outstanding shares, have entered into agreements to vote their shares in favor of the merger at a special meeting of shareholders to be held before the closing on a date to be announced.
Closing will follow the special meeting of shareholders of Electro-Sensors, consent of shareholders of Mobile X Global, and satisfaction of other customary closing conditions, including the U.S. Securities and Exchange Commission (the "SEC") having declared effective a registration statement, and The Nasdaq Stock Market having approved the listing of the common stock of the combined company.
Other Information about the Merger and Related Transactions
The transaction is structured as a statutory reverse triangular merger under Delaware and Minnesota law, under which a newly formed subsidiary of Electro-Sensors, Inc. will be merged with and into Mobile X Global, Inc., with Mobile X Global, Inc. surviving the merger and becoming a wholly owned subsidiary of Electro-Sensors, Inc. Electro-Sensors, Inc. will reincorporate in Delaware, be re-named Mobile X Global, Inc., and operate both the new Mobile X wireless business and the Electro-Sensors business.
Additional information about the proposed transaction, including a copy of the merger agreement, will be provided in a Current Report on Form 8-K to be filed by Electro-Sensors with the SEC and made available at www.sec.gov. More information about the proposed transaction will also be described in Electro-Sensors' registration statement and related documents relating to the merger, which it will file with the SEC.
Management and Governance
Upon closing of the merger, Peter Adderton, chairman and chief executive officer of Mobile X Global, will become the chairman and chief executive officer of the combined company. Mr. Adderton has decades of experience creating and operating digital platform businesses, including his former roles with Digital Turbine (Nasdaq: APPS), which currently has a market capitalization of approximately $1.7 billion and mobile virtual network operator (MVNO) Boost Mobile. Mobile X Global's management team has decades of experience operating large telecom providers and rapidly scaling private and public companies. Mobile X Global and Electro-Sensors are committed to retaining Electro-Sensors' existing employees and customers. Senior management of Electro-Sensors is expected to continue and assist in the integration of the combined company and the operation of the existing sensor business.
When the transaction closes, the current directors of Electro-Sensors will resign, and the Board of Directors of the combined company will initially consist of five members appointed by Mobile X Global.
Read the full press release here
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