Boku said the acquisition will increase its product range and allow it to expand into new sectors, such as finance and government. The deal will also give Boku broader exposure to key markets, including the US.
Danal, based in San Jose, California, provides real-time mobile identity and authentication to government agencies, financial institutions and retailers for managing risk and fraud.
Last year Danal generated revenue of US$5.1mln and made a loss of US$5.2mln.
Deal expected to be earnings dilutive in 2019
Boku expects the deal to be earnings dilutive in fiscal year 2019 as it invests in the Danal platform. Earnings are expected to improve through 2020 and the deal is anticipated to be earnings accretive thereafter.
In reaction, shares fell 16% to 82p in morning trading.
Danal will merge with a wholly-owned US incorporated subsidiary of Boku, which will cease to exist following completion of the acquisition.
The deal is expected to be completed at the end of the year, subject to shareholder approval.
Boku’s chief executive Jon Prideaux said: “This acquisition allows us to offer services that go further and to improve user quality for our customers while at the same time improving the mobile experience for users.
“Mobile commerce is booming, yet many tools were developed to support PC-based commerce.
“Danal has shown that MNO (mobile network operator) data can also combat fraud, reduce friction in signup and ensure regulatory compliance on mobile. These problems are relevant not just to our existing digital customers but also in other sectors including e-commerce, finance, transportation and government.”
Peel Hunt maintained a 'buy' rating on Boku, saying it thinks the deal "materially improves optionality in its current valuation by capturing more of the user journey beyond mobile payments."
"We have always held a view that adjacent to the mobile payment opportunity is a much larger opportunity for addressing the identity verification conundrum," the broker said.
"In acquiring Danal, Boku has turbo-charged its identity opportunity, without impacting its 2020 free cash flow outlook and beyond."
Boku posts jump in payment volumes and active users
Boku also updated the market on recent trading.
The group said total payment volumes in the 10 months to October surged 124% year-on-year to US$2.8bn and monthly active users jumped 83% to 12.2mln in October compared to the same month last year.
"With solid trading and greenfield opportunities in mobile identity, Boku remains one of our top picks; a pick and shovel play on high structural growth areas such as the subscription economy and mobile identity," Peel Hunt said.