Cocoon Data signs deal for $57m reverse takeover

Australian software security startup, Cocoon Data, has taken a step closer to listing on the Australian Stock Exchange, entering into a binding agreement for a AU$57 million reverse takeover of mining company, Prime Minerals.

Australian software security startup, Cocoon Data, is readying to list on the Australian Stock Exchange (ASX) as Covata Limited by September this year, after entering a AU$57 million binding agreement to merge with mining company, Prime Minerals.

Prime Minerals told its shareholders in a statement (PDF) late last week that it had entered into the bid implementation agreement (BIA) for the merger, which will effectively see Cocoon Data Holdings list its Covata security business on the ASX in a reverse takeover of the exploratory uranium mining company.

Under the terms of the BIA, Prime Minerals will acquire 100 percent of issued Cocoon shares via the takeover offer, with Cocoon shareholders offered total non-cash consideration of AU$57,281,673.

The two companies have agreed to enter into agreements with existing Cocoon option-holders to replace their existing 28,825,000 Cocoon options with existing Prime options upon successful completion of the merger.

To enable Prime Minerals to re-comply with the ASX Listing Rules, it plans to conduct a capital raising under the Prospectus to raise at least AU$2.5 million and up to between AU$10-15 million — subject to shareholder approval.

Prime expects to convene a meeting to facilitate shareholder approval in August.

The prospectus will be lodged with ASIC on 25 July. Prime Minerals will hold a shareholder meeting on August 11, while the prospectus offer closes. ASX relisting is scheduled for September 12.

Cocoon Data Holdings, based in Sydney, was founded in 2007, and its digital security business, Covata, allows users to send and store sensitive information using military grade encryption that secures data at the point of origin prior to it being shared and distributed to the cloud.

Covata has offices in Australia and the United States, with distribution agreements signed in Europe, the Middle East and Africa. According to a presentation (PDF) shown to Prime Minerals shareholders on May 20, it is also in advanced discussions with strategic partners in North America.

Covata has spent more than AU$30 million over six years to develop its Covata platform, according to the presentation, claiming that its intellectual property relating to the security offering would take years to develop and replicate.

The deal will see Cocoon founder and executive director, Trent Telford, take on the role of acting chairman and move to the US to oversee Covata's expansion in that market.

"Upon approval of the shareholders from both companies, Covata will emerge as a publicly traded entity with the available capital to support Covata’s growth strategy," said Telford in a blog posted on the Covata website earlier this month. "The board will be restructured as part of this process and I have accepted the role of acting Chairman.

"I will be moving my family to the United States to take a full-time role in helping the company deliver on its enormous promise. Being in the US will allow me to interact daily with our prospects, customers and partners so we can shape the product direction to address their specific requirements," he said.

The merger between Cocoon Data and Prime Minerals is the latest in a string of reverse takeovers by local technology companies aiming to list on the ASX — with struggling ASX-listed mining companies frequently the target of such manoeuvres.

At the end of April, Australian enterprise cloud services provider, PRM Cloud Solutions mounted a reverse takeover of ASX-listed mining exploration company, Minerals Corporation.

Meanwhile, in March, another Australian cloud provider, CloudCentral, revealed it would engage in a reverse takeover of vineyard ownership company, Dramana Estate, in a bid to gain backdoor entry to the ASX.