ipernica in $16m acquisition deal

West Perth-based intellectual property company ipernica Ltd has entered into a $16 million agreement to acquire geospatial media company NearMap Pty Ltd, which has selected Perth for its initial prototype testing.

The legally binding agreement allows ipernica to acquire a 100 per cent equity interest in NearMap, which creates high resolution aerial photomaps with multiple view angles similar to that of Google Earth.

ipernica said the difference was that NearMap was able to update its images more frequently and allow users to see environment changes over time with the ability to move back and forward month by month.

ipernica said high resolution photomaps have been captured monthly for the last six months over Perth, which now has the most detailed and changing photomaps ever flown for a city in the world.

Under the deal, ipernica will pay $4 million in cash and issue 60 million shares priced at 20c each and 12.5 million options at a strike price of 40c to NearMap.

As part of the deal, ipernica will inject up to $1 million into NearMap to support further growth while due diligence is carried out. Shareholder approval is also necessary.

If the acquisition does not proceed, ipernica will retain a 10 per cent interest in NearMap as part of the initial $1 million fee.

The acquisition is expected to be completed before the end of the year.

Below is the full announcement:

Commercialisation company ipernica today announced it had signed a legally binding Heads of Agreement to acquire a 100% equity interest in NearMap Pty Ltd, an innovative geospatial media company.

NearMap creates very high resolution aerial photomaps with multiple angle views at a fraction of the cost of traditional solutions. Their breakthrough technology enables photomaps to be updated much more frequently than other providers such as Google Earth, which can be many months out of date.

Also, for the first time, people will be able to see the environment change over time, as NearMap's online photomaps allow users to move back and forward month by month to see changes occur, such as the construction of a home or development of a new road.

With NearMap's revolutionary approach to high resolution photomaps, it has achieved its objective of a 20-fold operating cost reduction over current industry practices.

NearMap's ultimate goal is to cover over 20% of the world's population (700 cities) with photomaps updated at least on a monthly basis. NearMap selected Perth in Western Australia for its initial proto-type and preproduction testing.

High resolution photomaps have been captured monthly for the last six months for the city and as a result Perth has some of the most - if not the most - detailed and changing photomaps ever flown for a city in the world.

NearMap was profitable in FY 07/08 and its revenue model includes both:

direct licensing to government and industry and

location sensitive online advertising (for example a local Bank advertising its loan facilities to a consumer looking at a high quality photo of a house and surrounds via the web).

As the global US$400 billion media industry and US$10 billion geospatial industry evolves, and with consumer interest created by Google Earth, media companies will increasingly deliver online location based services and advertising to exploit consumer and industry demand. NearMap is positioned to meet this demand by delivering significantly better resolution, multiple views and more frequent updates.

On completion of the acquisition (due to occur no later than 30 December 2008) ipernica will acquire 100% of NearMap from the current shareholders, for a consideration of:

$4,000,000 in cash

60,000,000 ipernica shares at a deemed issue price of $0.20 per share

12,500,000 ipernica options at a strike price of $0.40, with a two year expiry period

The acquisition is subject to a number of conditions precedent including satisfactory completion of due diligence and ipernica Board and shareholder approval. As part of the cash consideration above, ipernica will inject up to A$1,000,000 into NearMap to support further growth, with the remainder due on settlement of the transaction. If the
purchase does not proceed, ipernica will retain a 10% equity interest in NearMap for the $1,000,000 investment.

In commenting on this acquisition, ipernica Managing Director Graham Griffiths said "this is a significant and important acquisition for ipernica that leverages the strengths of both companies. Following on from ipernica's two years of record revenue and profit, and a solid cash at bank, this acquisition will complement ipernica's existing business and revenue streams".

NearMap's founder Stuart Nixon has been at the forefront of geospatial industry for almost 20 years. His background includes:

Founded ER Mapper, a global geospatial software company, subsequently purchased by multinational Leica Geosystems Geospatial Imagery in 2007, now part of the Erdas group

Architect of the ER Mapper application and the Image Web Server technology that pioneered serving image maps over the web. Inventor of the geospatial industry standard ECW image

Honorary Fellow of the Spatial Sciences Institute

Recipient of the Australian Society for Exploration Geophysicists Award for Innovation in Applied Geoscience.

Inventor and holder of U.S. patents relating to image compression, processing and serving technologies.

NearMap's CEO Stuart Nixon said "we are delighted by this opportunity, as it enables NearMap to accelerate its plans for global expansion. We already have substantial interest from major Australian agencies and organisations in licensing our unique photomaps. We will be looking to progress these as soon as possible, and will leverage ipernica's intellectual property ('IP') and licensing expertise. I look forward to working within ipernica to maximise the value in our considerable IP and copyrighted photomaps and growing ipernica shareholder value."

Stuart Nixon will remain CEO of NearMap following completion of the acquisition and together with his experienced management team will have full operational responsibility for the business under ipernica ownership.

The ipernica Board believes that this acquisition will benefit ipernica shareholders through leveraging existing Company skills, cash and equity to grow the NearMap business more aggressively. In conjunction with ipernica's IP Licensing and Assertion business which delivered approximately $45 million in Revenue in FY 07/08, the ipernica Board believes that the acquisition will enable the Company to:

Deliver sustainable revenue and profit

Provide consistent returns to shareholders

ipernica also plans to raise between $1 million and $2 million in equity by the issue of shares at $0.20 per share to strategic partners and institutional and high net worth investors prior to completion of the acquisition.