Quantum Cryptography

New Quantum SPAC. Centricus Acquisition Corp, to Merge With Quantum Encryption Technology company, Arqit Limited

May 16, 2021

Arqit Limited, a leader in quantum encryption technology has entered into a definitive agreement to merge with Centricus Acquisition Corp, a publicly traded special purpose acquisition company. This transaction is expected to provide up to US$400 million of gross proceeds to Arqit. This merger is valued at approximately US$1.4 billion in equity and the pro forma enterprise value is estimated at around US$1 billion at the price of US$10 per share. This transaction will accelerate the future stages of Arqit’s business plan. Including the mass commercialization of their products and the launch of two satellites, targeted by 2023. 

The merger of two companies

Special purpose acquisition companies, also known as SPAC can be best described as publicly listed shell companies. One of the things that makes this interesting is that the company is often already listed. Quantum companies often merge with an existing company as they make their route to the public market, one example of this is IonQ that is merged with a company named DMY Technology Group Inc., and became the first quantum SPAC or better called SPAQ company. All of these SPAC companies are then listed on the NASDAQ index. For more about this type of merger and more information about SPAC and SPAQ’s read our article on IonQ which is also using a SPAC mechanism to make its way to market.

Arqit Limited one of the leaders in quantum encryption technology, and Centricus Corp, a special acquisition company have entered into an agreement that will result in Arqit becoming a publicly listed company. And after the closing of the transaction the freshly formed Cayman holding company, Arqit Quantum Inc, will merge with Centrus, acquire Arqit, and register its shares on the NASDAQ Stock Market, and will be listed on the NASDAQ under its new ARQQ ticker symbol. This merger was highly applauded by the CEOs of both companies. 

The world needs simpler, stronger cyber security, and Arqit addresses that need. After four years of innovation in stealth mode by a world leading multi- disciplinary teams of scientists and engineers, we are ready to go to market. This technology is important and we need to take it to hyperscale as quickly as possible, because the problems we solve are problems for everyone. The capital from this transaction will enable us to develop critical relationships with existing and new customers and fully scale our platform as a service with a balance sheet which gives us speed, momentum and the resilience to deliver on our commitments to customers for the long term.

David Williams, Arqit CEO

More about the deal

The transaction values the merged company at a pro forma enterprise value of around US$1 billion, and it is expected to provide up to 400 million of gross proceeds to Arqit from a combination of US$345 millions cash that is held at the Centricus trust account, and approximately US$70 million from a fully committed PIPE (private investment in public equity). All the existing investors and shareholders will continue to hold their equity ownership, and the current Arqit shareholders are going to remain the majority owners of the combined company. Read the full article.

Who is Arqit and what is Quantum Cloud?

Arqit Limited will be another Quantum Company that will get to the public market via a SPAC.

Arqit is a company that pioneered its unique quantum encryption technology, Quantum Cloud, which makes the communication links of any device that is in a network more secure from any present or future forms of hacking, it can be said that its safe enough even from an attack of a quantum computer. Quantum Cloud is designed to replace the current PKI or “public key infrastructure”. PKI is designed in the 1980s and doesn’t fit its purpose in a hyperconnected world, and quantum computers in this decade will likely be able to break the PKI’s encryption algorithms.

How the Quantum Cloud Works?

Quantum Cloud from Arqit is symmetric encryption software, able to encrypt data and keep it safe from outside attacks. How does Quantum Cloud work? QuantumCloud puts a small software agent at any endpoint device. This software then creates an unlimited number of symmetric keys with partner devices. Currently, Arqit’s system uses source keys for this role, these source keys are originated in data centers, but it is planned by 2023 this role to be taken over by satellites. It is planned these satellites to use a transformational new quantum protocol created by Arqit, this protocol solves all the known problems of satellite quantum key distribution. These satellites will create a backbone of secure keys within data centers globally, and a quantum-safe boundary protecting those centers where data is stored.

This transaction will give Arqit the ability to establish itself as a leader in the encryption space – the prospect of the threat from quantum computing will serve to accelerate the broad adoption of Arqit technology. This is a deep tech company which is many years ahead of the market. Arqit has protected its IP by remaining in stealth mode whilst filing over 1,000 claims on more than a dozen patent applications. It is thanks to funding from the British Government and its VC partners that Arqit is now ready to commercialise and scale its product suite; this will complement an already strong cohort of launch customers. The executive and advisory team are a ‘transatlantic who’s who’ of relevant cybersecurity, space and military experience – this team also enjoys peerless access to relevant enterprise customers.

Centricus CEO Garth Ritchie

The way this technology is simple, a user can create an endless amount of number key pairs, in groups with size as needed. These keys are never delivered, and because of this, they cannot be intercepted. They are created at the endpoints and because of this, they can never be known by third parties. For their purpose, they can be used only once and can be replaced frequently. The service is sold on a self-service basis in the cloud, resulting in great scalability of this business model.

Arqit believes that their software will transform cybersecurity and will provide an easy migration from the existing encryption technology, and make the customer safe from quantum attack.

Current customers of this software include the UK Government, Sumimoto Corp, BT plc the European Space Agency. In addition to this many companies are currently testing the Arqit technologies, with companies like Northrop Grumman, Iridium, and Verizon interested in this software.

This merger will help Arqit to establish itself in the encryption space, and the capital of this transaction is going to allow Arqit to develop some critical relationships with new and existing customers and make their software a more viable option for customers that need stronger cyber security.