Cubic Telecom shareholders net €473m payout from sale of majority stake to SoftBank

Japanese giant SoftBank has paid €473 million for a controlling stake in Irish technology company Cubic Telecom, in a deal that will net the company’s founders and its private backers a multimillion-euro payout.

The agreement values Cubic at more than €900 million, with SoftBank taking a 51 per cent stake in the company. Existing shareholders, including founder Barry Napier, US company Qualcomm, the Ireland Strategic Investment Fund, Act Venture Capital and Volkswagen-owned Cariad, have all sold a portion of their stakes, but will remain as shareholders in the business.

Prior to the deal, Mr Napier held shares in the company through BPI Telecom Ltd, which owned 34.55 per cent of Cubic, according to company filings.

Mr Napier owned 80 per cent of BPI, with the remaining 20 per cent belonging to Barry Higginbotham. He is also listed as having a small shareholding in the company, along with other executives, who each own less than 1 per cent of Cubic.

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This would suggest that Mr Napier owned about 28 per cent of the business before this deal. While it is not clear what shareholding Mr Napier has sold, a pro rata payout of the proceeds would be worth €132.4 million.

Founded in 2005, Cubic develops mobility solutions for the internet of things (IoT), machine-to-machine and device-manufacturing companies, and has signed deals with car manufacturers such as Audi and Volkswagen. Its software is installed in millions of cars globally.

Cubic employs more than 300 people globally, with two-thirds of that figure in Ireland. Latest accounts for Cubic Telecom Ltd show it made an after-tax loss of €6.1 million on revenues of €56.3 million for the year to the end of December 2022. This compared with a loss of €5.9 million on income of €43.6 million in 2021.

Its adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) – before share-based payment charge – amounted to €6.1 million last year versus €6.6 million in 2021.

The directors’ report states that Cubic was at an “earnings transformation point”, and expects to continue to show significant growth in sales, adding that the outlook for “future performance is strong”.

The deal will see SoftBank and Cubic form a strategic partnership to drive the future of software-defined connected vehicles and other IoT assets through global platforms, with research predicting up to 95 per cent of new cars sold by 2030 will be have some form of connectivity built in.

“That’s creating a whole new revenue opportunity for car manufacturers. Cubic is extremely focused on continuing to build out its current solution of connecting vehicles in an easy way for car manufacturers, and then providing additional services and new innovations to their end users on top of that,” said Shane Sorohan, chief operating officer with Cubic Telecom.

“Where SoftBank comes into that is that they’re a very large technology company globally, they’re a very innovative company. They have great relationships, particularly in the Asia Pacific region.

“They’ll be very close with a lot of the car manufacturers in Japan and in Asia, and we see that we can work closely with Softbank to start pursuing opportunities with those car manufacturers in the region. In addition to that, they’re very big within satellite and terrestrial and AI as well ... and there’s opportunity to work with Softbank in new innovations from where we are today within satellite and AI.”

When the transaction is completed, Cubic will become a consolidated subsidiary of SoftBank, although the existing management team is remaining in place. SoftBank’s Daichi Nozaki will join the board, along with two other SoftBank appointees. Mr Napier will remain on the board, too, with the existing shareholders holding three seats.

The valuation puts the company in reach of “unicorn” status, a €1 billion valuation in the tech industry. But Mr Sorohan said the company was not concentrating on the figure, viewing it instead as recognition for the work it has done to get to this point.

“I think it’s a great statement as well for Irish technology companies in general, that there’s fantastic technology companies within Ireland that have built incredible businesses and that brings more attention from global businesses in,” he said.