Rimini Street and GP Investments announced a definitive merger this week. The deal will see 25% of the new company owned by shareholders of GPIA. More importantly it will see Rimini Street listed on NASDAQ without the expense or stress of an IPO.
How to get listed without an IPO
GP Investments was the first Latin American firm to go public in 2006. In May 2015 it set up a corporation called GPIAC (GP Investments Acquisition Corp) and listed it on Nasdaq (NASDAQ: GPIA). Its sole purpose was to find a company that it could merge with or acquire within two years.
Once the merger is complete the new organisation will change its listing to NASDAQ:RMNI. This should make it easier for Rimini Street to raise funds for even further expansion. This is a clever move by Rimini Street as it avoids some risks of going IPO. It starts life with a post-closing equity value of $854 million at $10.00 per share. What will be interesting is where the share price will initially move to and what the market cap of the new company will settle on.
Concern or opportunity for SAP and Oracle
The new company will immediately have available additional investment funds for further expansion. SAP and Oracle may find this a concern. It will mean that Rimini Street could open up in new markets and expand faster in existing ones. Rimini Street delivers maintenance and support services for SAP and Oracle software at a fraction of the cost of direct services from the two ERP giants.
What Rimini Street does not appear to have done is protect its shares in the same way as Workday did when it went public. It is possible that Oracle or SAP could purchase the company. Although, given the acrimonious relationship history between them this would not be a white knight acquisition. This would also likely not end the problem entirely.
Great opportunity for Rimini Street
This deal will squash any remaining doubts about the stability of Rimini Street that might have lingered on after the conclusion of the trial between them and Oracle. That left Rimini Street with a large settlement to make. That was largely covered by a funding round that raised $125 million in June 2016 led by Colbeck.
Rimini Street hasn’t looked back since, enjoying 45 quarters of successive growth. Its estimated revenue for 2018 is $295 million, this equates to a valuation of 2.8x. Seth A. Ravin, founder, CEO and Chairman of Rimini Street commented: “We believe that having a public company structure will further fuel our growth by facilitating additional sales opportunities and providing additional capital market access. We are pleased to enter into this transaction and work with GP Investments, Ltd. as a new investor and business partner with a proven track record of providing value to growth companies.”