TORONTO, ONTARIO — (Marketwired) — 01/29/15 — Smart Employee Benefits Inc. (“SEB”) (TSX VENTURE: SEB) is pleased to announce that its indirect wholly owned subsidiary, 101270941 Saskatchewan Ltd., has acquired all of the issued and outstanding shares of Paradigm Consulting Group Inc. and all of the issued and outstanding units, directly and indirectly, of PCGI Consulting Services Partnership (collectively referred to as “Paradigm”).
The transaction closed in escrow with an effective date of December 31, 2014 subject to TSX Venture Exchange approval, which approval has now been obtained, and the advance of funds from SEB–s financier, which funds will be advanced immediately upon the completion of the amalgamation described below.
Paradigm is a very strategic acquisition for SEB, bringing significant government and corporate client relationships along with technical skills and expertise, which allow SEB to compete more effectively in Western Canada, particularly in the areas of healthcare and benefits administration and adjudication. SEB has made significant progress in developing a presence in Western Canada and Paradigm consolidates SEB–s strength, providing local presence and delivery capability to service and manage important client relationships in this marketplace.
TRANSACTION TERMS: The purchase price of Paradigm is up to $15,793,436, consisting of firm consideration of $13,427,864 and additional consideration of up to $2,365,572 if certain performance targets are achieved.
The “firm consideration” consists of the following:
In addition, 1,000,000 share purchase warrants were issued to Paradigm employees as a retention incentive, of which 12,500 warrants were issued to Paradigm–s President and 20,000 warrants were issued to Paradigm–s Vice President of Finance. The majority of Paradigm employees received an allocation of warrants. All warrants have a 48-month term and an exercise price of $0.50 per share. The warrants vest one-sixth every six months over a 36 month period following the closing of the transaction.
The “additional consideration”, payable in cash, consists of up to:
If the cumulative EBITDA targets are reached prior to the three year and four year benchmarks, respectively, the additional consideration will be paid earlier.
In addition, Paradigm employees will be entitled to participate in two annual bonus pools:
Due to the fact that the Paradigm acquisition involves the purchase of shares as well as the purchase of partnership units, both directly and indirectly through holding companies of certain of the vendors, various companies will be amalgamated to simplify the corporate structure such that the business acquired will reside in a single company going forward. The purchaser company, 101270941 Saskatchewan Ltd., will amalgamate with Paradigm Consulting Group Inc., 5677387 Manitoba Ltd. (after its continuance into Saskatchewan), Craven Farms Ltd. (after its continuance into Saskatchewan), 4311612 Manitoba Inc. (after its continuance into Saskatchewan) and 101271586 Saskatchewan Ltd. The name of the amalgamated company will be Paradigm Consulting Group Inc.; and all of the issued and outstanding shares of this company will be owned by Somos Consulting Group Ltd., a wholly owned subsidiary of SEB.
In a subsequent press release, SEB will announce the completion of the continuances and amalgamation, which is expected within the next seven days. At that time, the Paradigm transaction documents will be released from escrow and the purchase price proceeds will be paid to the vendors.
MANAGEMENT COMMENTS:
John McKimm, President/CEO/CIO of SEB states, “Paradigm–s experience and enviable references add to our growing Canadian presence, particularly in Saskatchewan and Manitoba, both long time innovators of healthcare services. This acquisition is in line with our focus on deepening client relationships in government and healthcare in Western Canada. Paradigm brings both important client relationships and technology expertise that add to SEB–s suite of solutions and services, enhancing SEB–s technology offerings and significantly increasing SEB–s delivery capability to corporate and government sectors in Western Canada. SEB has substantial client opportunities in Western Canada for its technology solutions and the Paradigm acquisition is expected to significantly increase the success of these opportunities. Paradigm–s executive management and employees are very experienced and highly regarded in the marketplace. The acquisition of Paradigm is expected to increase consolidated SEB revenues to over $60.0 million annually, and contribute substantially to the overall profitability of the SEB Group. Paradigm has annual revenue of approximately $24 million and a track record of substantial profitability.” Mr. McKimm continues, “Healthcare systems and software for benefits management have not kept up with the evolution of technology in other industries. SEB–s focus has been on utilizing our technology expertise and knowledge, in managing and transacting data in other industry sectors, to create high value-added end-to-end software solutions and services which provide healthcare and benefits clients with more cost-effective and flexible technology solutions, enhanced automation, reduced error rates and allow the real-time detailed reporting required to make informed business decisions. Paradigm enhances SEB–s delivery and support of these solutions in the marketplace, particularly in Western Canada where SEB has a number of substantial client opportunities pending.”
Mark Hustak, President/CEO of Paradigm states, “Having grown unique specialties in healthcare IT and managing and transacting big data, SEB has the ability to significantly deepen our expertise in our current markets and beyond. With SEB, we are poised for delivery of high value-add solutions that satisfy customers– most relevant needs in the growing demand for immediate Business Intelligence around Big Data.” He continues, “Paradigm has been evaluating its options during the last year to expedite our growth prospects. Over the past 23 years, Paradigm has provided management consulting, change management, and application and IT services to corporate and government clients. Paradigm has over 150 billable consultants, mostly employees, who service a legacy client base where the top 10 clients have an average engagement history of over 12 years. Paradigm has unique specialty practices and strong client relationships in healthcare, government, technology integrators, insurance and utilities. The SEB Group gives Paradigm the opportunity to incorporate advanced software and solutions into its sales mix. These solutions will have significant value for the majority of Paradigm–s client base. SEB has made significant progress in establishing a footprint in Western Canada and Paradigm gives SEB the local presence and delivery capability to expedite and expand this footprint. The combination of Paradigm and SEB significantly enhances the opportunity for both companies to become a major competitor in Western Canada in providing technology to clients, particularly solutions for healthcare and benefits and claims management.”
PARADIGM–S STRATEGIC FIT WITH SEB:
ABOUT PARADIGM: Paradigm has a 24-year history of providing management and information technology consulting services to healthcare, insurance, financial services, public sector, telecom and energy clients. With over 150 billable consultants, primarily employee based, Paradigm is a market leader for delivering management consulting, portfolio/program/project management and application technology services to an enterprise level client base. Paradigm has a very deep portfolio of IP for its key client verticals which enables accelerated delivery of projects and maintains long term client relationships. Paradigm–s staff has very strong accreditations in numerous technology disciplines which differentiate them in the marketplace. The majority of Paradigm–s employees were shareholders in the former company. The “senior management team” of six has over 180 years of combined industry expertise. Paradigm–s services are as follows:
ABOUT SEB: SEB–s core expertise is managing specialized Big Data environments, of which healthcare is a major focus. SEB is a technology company providing, via a SaaS business model, software, solutions and services specializing in managing group benefit solutions and healthcare claims processing environments for corporate and government clients. Health Claims Processing alone is a $60.0 plus billion industry, of which over $37.0 billion is employee group benefit plans and over $27.0 billion of other healthcare benefit claims (e. g. workers– compensation claims, travel benefits, various federal and provincial government programs, dental associations, drug associations, etc.).
In the employee group benefits industry, SEB operates as a Third Party Administrator/Third Party Payor and Insurance Brokerage utilizing its software platform to provide “totally hosted PCI compliant supply chain solutions” for managing the complete group benefits business processes between insurers, clients, brokers, consultants, technology service providers and healthcare service providers. In healthcare claims processing, SEB also operates as a systems integrator utilizing its technology platform together with other technologies to provide customized, fully integrated solutions for specialized environments (e.g. travel claims, student benefits, hospitals, unique government applications, etc.). The technology and expertise deployed in this area also allows SEB to provide other related supply chain, systems integration and human resource solutions and services to the same clients.
Forward-Looking Statements: This news release is intended for information purposes only. Statements made in this news release may contain “forward looking” information about the company–s future business prospects. These statements while expressed in good faith and believed to have a reasonable basis are subject to risk and uncertainties that could cause actual results to differ materially from those set forth or implied by such forward looking statements. Investors should consult a professional advisor before making any investment decision.
For further information about SEB, please visit .
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Smart Employee Benefits Inc.
John McKimm
President/Chief Executive Officer
(416) 460-2817
Smart Employee Benefits Inc.
Shelly Frank
Vice-President, Marketing
(888) 939-8885 x 358
First Canadian Capital Corp.
Dan Boase
416-742-5600 or 1-866-580-8891
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