North American IT provider Converge Technology Solutions Corp. (TSX-V: CTS) announced a $20 million bought deal on Tuesday, and upsized it to $30 million on Wednesday.
Under the new agreement, a group of underwriters, led by Canaccord Genuity Corp. and Echelon Wealth Partners Inc., have agreed to purchase 14.65 million common shares in the company at $2.05 each. Converge has also granted them an over-allotment option to purchase up to an additional 2.20 million common shares for 30 days after the deal closes.
Converge says it plans to use the proceeds for acquisitions, working capital, and general corporate purposes.
As covered in the Globe and Mail, Converge recently received a "buy" rating from Laurentian Bank analyst Furaz Ahmad, with a price target of $3.75. Converge already owns a significant portfolio of IT companies scattered across North America, with 12 acquired in the last three years, and Mr. Ahmad argues that future acquisitions will continue to be a significant growth driver for the company. He also added that the company has about 150 companies that are currently being reviewed for M&A. As Converge attempts to consolidate more under-funded IT providers and brings them to scale, he estimates the company could reach $800 million in revenue in 2021.
For now, the company remains fairly far off from that goal. In its Q2 earnings released in August, the company reported a net loss of $4.4 million on revenue of $175.3 million. Though, also during that quarter, Converge was ranked #1 in CRN's "Fast Growth 150" list of the fastest-growing IT providers.
Shares of Converge have risen 70 cents year-to-date, including a 19-cent drop following the announcement of the latest bought deal.