Software vendor Formjet has agreed an option to buy a “specialist distribution company” for up to £1.2m, but has declined to divulge the identity of its target.

The Alternative Investment Market-listed firm has placed 120 million new ordinary shares to raise money for the acquisition, which it expects to complete on or around 18 August.

The vendor, which works with mass retailers such as Tesco and owns the Panda Software brand, said the move would provide significant cost savings in warehousing and financing.

The distributor in question is based in the east of England, has a turnover of £12.6m and boasts a “significant customer base of IT resellers and independent retailers”, Formjet revealed.

An initial payment of £400,000 will comprise £200,000 in cash and 10,000,000 Formjet shares. Further payments up to a maximum of £800,000 will be made on a performance-related basis on a two-year earnout.