Supply chain finance industry set for disruption as Tungsten lines up takeover targets

Supply chain finance industry set for disruption as Tungsten lines up takeover targets

E-invoicing network OB10 is set to be paired with the UK arm of First International Bank of Israel under plans hatched by a new investment vehicle created specifically to shake up the supply chain finance industry.

Tungsten Corporation, established last year by Edmund Truell, founder of private equity house Duke Street Capital, is set to float on London start-up market AIM with a view to initiating a reverse take-over of OB10 and First International Bank of Israel.

Tungsten is looking to raise £160 million to fund the takeovers and provide working capital for the combined businesses.

Part of the package of transactions also includes provisions for the acquisition of a five-year rolling licence agreement with @UK PLC to deploy its spend analytic software technology to the invoice data crossing OB10's network.

"The market opportunity for the spend analytics offering is significant," says Tungsten in its prospectus. "By applying illustrative cost saving economics for price variance and price benchmarking, a multi-billion pound cost saving opportunity across OB10's buyer network is implied."

"We have an exciting opportunity to create a disruptive global player," says Edmund Truell. "We believe that TungstenAnalytics can provide considerable savings for buyers on the platform from which we would expect to benefit. The strategy for the group to include a clean, duly authorised, UK bank into the middle of the flow of billions across the global network should provide suppliers with access to accelerated invoice settlement on a transparent and simple to execute basis. Tungsten thus aims to transform the financial aspects of the global supply chain."

Co-founded by Stefan Foryszewski, a former head of data delivery at Visa International in 2000, OB10 has grown to encompass a network of more than 140,000 suppliers in 42 countries. It processed more than £100bn worth of invoice transaction value last year.

OB10's shareholders can expect to receive £99 million in cash if the transaction goes through, with about 30% of the proceeds to be locked up in Tungsten shares.

Comments: (2)

Enrico Camerinelli
Enrico Camerinelli - Aite Group - Boston 04 September, 2013, 11:13Be the first to give this comment the thumbs up 0 likes

Eventually this validates one of the findings I posted on a Finextra blog http://www.finextra.com/Community/FullBlog.aspx?blogid=6148 some time ago.

Enrico Camerinelli
Enrico Camerinelli - Aite Group - Boston 06 September, 2013, 18:14Be the first to give this comment the thumbs up 0 likes

Tungsten has the right ingredients. But is Tungsten a good cook? Using another metaphor, they have key orchestra players, but is the director as good? I will like to see how Tungsten will blend the various ingredients to build a solid value proposition. So far they certainly enjoy not being a bank, therefore not being subject to regulatory restrictions and limitations. At least until shadow-banking will not be put under the scrupulous lens of the regulator. This gives them quite some room to operate. As in any supply chain finance program the issue is not to have a good lineup of technology and products, but to create value to the corporate user. That is something that technology cannot buy.

 

The fact they are not bankers also gives them additional edge, as a bank-centric strategy has never helped these initiatives to succeed. Just see what happened to JPM/XIGN, and, very recently, to USBancorp/VISA. Banks tend to buy/develop software and then use it for internal purposes before extending it out to clients. So the resulting solution (i.e, the "platform") is very effective at optimizing bank operations and STP at the expense of the end user who has to duplicate data and re-key information before enjoying the benefits.

 

The spend analytics component is indeed intriguing and shows a good vision. Again, only time will show how successful their approach of adding this component to the puzzle will be. In its own, spend analysis is not new. Certainly not for players of the likes of Ariba or Basware.

So I will carefully watch how Tungsten will make it a competitive differentiator.

 

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