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Why this small cap ASX tech share is crashing 12% lower today

James Mickleboro

The Arq Group Ltd (ASX: ARQ) share price is one of the worst performers on the All Ordinaries on Tuesday.

In afternoon trade the leading digital solutions partner’s shares have returned from a trading halt and are down 12.5% to 31.5 cents.

This latest decline means that Arq Group’s shares are now down almost 80% since this time last year.

Why is the Arq Group share price crashing lower?

This afternoon the company announced the signing of a binding agreement to sell its Enterprise Services Division on a cash and debt free basis.

According to the release, the agreement is with an entity owned by a consortium comprising Quadrant Private Equity and certain members of its management team. This includes CEO Tristan Sternson.

Gross cash proceeds of the sale are expected to be $35 million less a final payment of $6 million due to the vendors of InfoReady, which was acquired by the company in 2016. The net proceeds will be used to pay down the company’s debt.

The transaction is expected to complete on March 2 and is not subject to any conditions.

Name change.

As the transaction includes the rights to the Arq brand, the company will be changing its name once again. Arq Group was until only recently known as Melbourne IT.

The company intends to put forward a change of name resolution at its upcoming annual general meeting.

The Chair of Arq Group, Andrew Reitzer, said: “After engaging with numerous parties interested in acquiring the Enterprise business over the past few months, we are pleased to announce the sale of the business to Quadrant. Quadrant has a track record of acquiring industry leading businesses and we wish the team every success in the future.”

“Decoupling Enterprise will allow for the team to focus on SMB, enabling it to deliver to its vision of being the most impactful digital marketing partner in Australia, unlocking the growth potential of local small and medium businesses,” added Mr Reitzer.

Change of CEO.

As a result of this transaction, the company will be replacing its CEO Tristan Sternson.

Brett Fenton, who leads the company’s only remaining business, the SMB Division, will replace Mr Sternson as interim CEO with immediate effect.

The post Why this small cap ASX tech share is crashing 12% lower today appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020