It’s a company that is little-known outside its shareholder group, its customers and the speciality IT press, but NZX-listed Solution Dynamics got a brief publicity boost in early September, when it was the subject of a takeover offer by also NZX-listed Being AI Limited.
On September 8, Auckland-based Solution Dynamics - a digital print, mailhouse processing and business software firm with a growing interest in AI - received a non-binding indicative offer (NBIO) from a subsidiary of Being AI, the company billing itself as New Zealand’s first listed AI company. The proposition was rather amorphous: an “either partial or full takeover by BAI” of Solution Dynamics and ‘options for [Solution Dynamics] shareholders to either take a combination of cash and Being AI shares (relative proportions were not disclosed) or all Being AI shares.”
There was no option offered for Solution Dynamics shareholders to sell their shares and get out, or any idea of what Being AI would do with the company if it obtained a controlling interest without a full takeover.
Since listing in April, Being AI had already marked itself out for doing things differently. The company - originally comprised of a legacy courier mail business, an AI consulting firm, and a private school, came in for a warning from NZRegCo after its share price rose exponentially shortly after listing. It had listed by backing into the shell of listed but inactive company, Ascension Capital.
Patrick Brand, CEO of Solution Dynamics, says he wasn’t surprised the company was the focus of a takeover intention.
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Solution Dynamics was not going to allow Being AI to have a peek at the books, however.
“The NBIO was, and remains, an incomplete proposal and can only be seen as highly conditional,” it said in a statement to the NZX. “In the absence of sufficient detail to form an opinion that the proposed transaction was in the best interests of all [Solution Dynamics] shareholders, the Board has declined [Being AI’s] request for access to confidential due diligence information.”
From that point, that was that, Solution Dynamics shares came off their trading halt, and no further communication between the parties has taken place, leaving everyone none the wiser, to hear it told by Solution Dynamics CEO Patrick Brand.
“Our board did the evaluation and determined there wasn't sufficient detail to be able to take the next steps forward, and responded that way, and I don't think we've heard anything since,” Brand, an American, told The Post from his New York base, from which he shuttles back and forth to New Zealand.
But “I wasn't surprised that folks were interested in us,” he added.
“We’ve had a good run over the last three years. We have lots of cash on the balance sheet…we have attractive technology so it wasn't surprising that people are interested in us. That part didn't surprise me at all.”
Still happening?
In fact, Being AI, which has been on an acquisition spree over its 7 months as a public company, is still looking at Solution Dynamics, and still keen, CEO David McDonald told The Post.
Being AI CEO David McDonald says his company is still mulling some sort of full or partial takeover of Solution Dynamics.
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“We’re very quietly working on this in the background … there’s nothing to report, other than we've expressed our interest, and just want to work through the details of whether there's something to be done there or not.”
This will no doubt be harder as Solution Dynamics rebuffed Being AI’s bid for information to conduct due diligence. But McDonald said there were obvious synergies to be had between its own Send Global legacy mail business, which also deals in specialist file management solutions, physical and digital mail preparation services and bespoke filing solutions, among other things.
There’s quite a bit of overlap with Solution Dynamics, which was established in 1996, and does a whole lot under the banner of “helping our customers communicate better with their customers”.
Solution Dynamics clients are mainly non-profits, often operating over several continents, and one is the global business of WorldVision, which is regularly in communication with its two million sponsors. While it has many non-profits on the books, it also has the likes of commercial customers, including US tech and postage giant Pitney Bowes.
“We started off doing that through print and mail …as what is known in New Zealand as a mailhouse, and in fact we are still one of the leading mail houses in the New Zealand market,” Brand told The Post.
“But about 10 years ago, we realised that with the secular decline of mail, that we needed to expand upstream into software and into digital customer communications...the channel that we can help our customers connect with their customers could be digital or it could be print.”
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And that is why even the large customer communications solutions offered by the likes of Google and Microsoft and others don’t quite knock Solution Dynamics off its perch, and are sometimes - as in the case of Salesforce for example - used together with the company’s systems.
“What we tend to find is that [the big tech players] specialise in the digital solutions, but don't understand a lot about print and mail,” said Brand. “And what we're able to do is stitch together an end to end solution that enables our customers to communicate in all those different countries and ways.”
Going AI
Solution Dynamics company has most recently launched a product called GenComm AI - a product that composes, personalises and translates communications among other things. Being AI, which is focused on “deploying AI and advanced technologies in our own investments, developing patentable AI solutions, and supporting third-party clients with their AI transformations” could potentially add fuel to this move by Solution Dynamics.
Not that the company appears to need the fuel, or extra capital - it is debt free, with $8 million in cash on its balance sheet.
“Whether it's to fund growth initiatives, to look for acquisitions, whether it's internal or external investment we have, we certainly have adequate cash, mainly because we've had such a strong financial performance over the last three years.”
Solution Dynamics is a digital print, mailhouse processing and business software firm with many large companies and non-profits as clients.
This year Solution Dynamics hit the same macro-economy blip as most others, reporting a net profit after tax of $2.82 million in the year ending June 30, 2024, a 17.7% decline on last year, (albeit the second highest net profit the company had ever produced.) Revenue had also dropped, down 4.6% to $38.7m. Unlike many other companies, Solution Dynamic’s New Zealand operations made significant progress, gaining share in a declining local print and mail market and continuing to pick up new work from local councils, while its international operations were soft, with ongoing weakness in the US mortgage market and lower customer volumes altogether impacting results.
One noteworthy element in the Solution Dynamics accounts is an International Growth Fund development grant from NZ Trade & Enterprise, which the company used to undertake a rebrand. Within the year it received $200,000 as part of this grant while last year it received $100,000 under the same grant. The loan means the company’s dividend payout ratio is capped at 50% for the duration of the grant.
Even so, why should the taxpayer be funding what shareholders are usually tapped for - extra capital - especially while the company is sitting on piles of dosh?
Brand seems surprised at the question, given, he said, public companies are not precluded from applying.
“NZTE has been a great partner of ours for many years, and we appreciate the grants that they've been giving us,” he said. “We got a new grant in 2023 that runs for about one more year now, and that grant was really to help us grow our business outside of New Zealand. And it's a co-funding grant, so when we make an incremental investment, say, in the North American market, then they match that up to a certain amount. And it's really, really been helpful, you know, to enable us to make incremental investments, particularly in sales and marketing … it’s just one in a series of grants we've got from NZTE over perhaps 10 or more years.”
With acquisition targets offshore, particularly large international companies with operations in several companies, and with a CEO who is American and bases himself in New York (though comes back and forth to New Zealand), and with a rather small market cap of about $16.2m and fairly low levels of trading, another question makes itself apparent - why is this company still listed on the NZX?
“Well, our focus is really, you know, a technology growth story. We’ve just had our 20th anniversary on the New Zealand exchange.That’s been part of our legacy. In terms of going forward, I think really it's up to the board to make a decision how they want to fund growth, but at this point, I see no reason why we would not continue to be a public company.”
– The Post