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STARHUB has inked a deal to buy a home-grown cryptography and digital security company for up to S$122 million, the telco said on Friday.
The put and call option agreement with the owners of D'Crypt Pte Ltd would see StarHub pick up the company's entire share capital in two phases, with the acquisition paid in cash out of StarHub's internal resources.
Set up in 2000, D'Crypt designs and produces solutions in fields such as encrypted communications and high-performance computing, with a signature project being the computational and security technology behind Singapore's Electronic Road Pricing In-Vehicle Unit.
D'Crypt's net asset value was just over S$16.8 million in the financial year to Dec 31, 2016, according to the StarHub announcement.
It is headed by Antony Ng, whose team won the Ministry of Defence's top Defence Technology Prize in 1998.
StarHub said in its filing with the Singapore Exchange that the proposed acquisition "is a strategic investment which will enhance the company's capabilities in the enterprise solution space", pointing to cybersecurity, digital security and the Internet of Things as areas for growth.
It also noted that the acquisition would give the telco "access to a world-class engineering team that will help develop new intellectual property and products relevant to the various markets as well as cater to Singapore's Smart Nation initiatives".
StarHub's outgoing chief executive Tan Tong Hai said in a statement that the move "will further expand the breadth and depth of our enterprise solutions", a business segment which he called "a key pillar of our growth strategy".
Enterprise fixed services most recently made up 18.8 per cent of StarHub's third-quarter revenue - up from 16.8 per cent in the same period the year before - for a turnover of S$109.4 million in the three months to Sep 30, 2017.
Chong Yoke Sin, chief of enterprise business group, StarHub, also said: "D'Crypt is a great asset with proven technology and R&D capabilities, and its cryptographic experience complements our Cyber Security Centre of Excellence in terms of delivering effective solutions to meet an emerging generation of security and vulnerability threats."
Under the terms of the deal, StarHub would take a 65 per cent stake in D'Crypt by early 2018 and consolidate its interest by mid-2021, turning D'Crypt into a wholly owned StarHub subsidiary that will nonetheless operate as a standalone unit led by its present management team.
Dr Ng, D'Crypt's chief executive officer, said in a press release: "In addition to the significant alignment in our complementary capabilities, being part of StarHub will allow D'Crypt to deliver more innovative products and systems for ever more challenging applications and discerning customers."
The first phase of the acquisition comes with a price tag of S$57.46 million, while the aggregate maximum cash consideration for the second phase is S$64.54 million.
The completion of the acquisition is subject to certain conditions, such as no event taking place that reduces D'Crypt's annual revenue or net profit before tax by 20 per cent or more, as well as D'Crypt providing specified audited financial statements to StarHub.
StarHub shares closed lower by S$0.01, or 0.34 per cent, to S$2.92, before the announcement.