More market action in the listed tech sector – the third in two days with NBN provider Superloop bidding to buy Australia’s largest independent internet service provider (ISP), Exetel to try and give its core business a bit of a bump.
Superloop went into a trading halt on Monday and yesterday announced it was buying ISP Exetel for $110 million in cash and scrip.
Superloop is asking investors for $100 million to fund most of the bid.
It will raise $49 million via a fully underwritten institutional placement and $51 million via an entitlement offer at 93 cents per share, a 10.6% discount to Friday’s close of $1.04.
Superloop has a market value of more than $380 million, so the takeover should push that close to the half a billion mark.
Monday saw the agreed deal (at this stage) that will see BGH Capital buy Hansen Technologies for $13 billion, while Altima rejected a $5 billion offer from US giant, AutoDesk.
BGH is a private equity shark trying to grab control of a company with existing technologies that sell and work. Altium has a reasonable track record but has stumbled a bit in the past few months with downgrades. AutoDesk reckons that can be fixed give it is worth $64 billion.
Altium shares fell 2% yesterday after Monday’s big rise to end at $37.08. The $38.60 offer from the uS group isn’t happening, but the company is on the market and its now a question of price.
Superloop said in Tuesday’s statement to the ASX that the acquisition of Exetel’s 110,000 consumer and business customers would accelerate use of its infrastructure assets – other words it is trying to buy volume and scale because it hasn’t been able to generate it from its existing business.
Superloop estimates cost savings of $5 million a year from increased Superloop use of its networks utilisation. The savings will be won in the first 12 months after the bid is effective.
Separate to the raising and acquisition, Superloop has trimmed the upper end of its 2021 earnings outlook – a sign that existing operations are doing it tougher than expected.
The company now expects EBITDA of between $18 million and $18.5 million, down from a range of $18 million to $20 million announced in February.
Given the shares are down 2% so far this year and have halved in the past three, this deal looks like an attempt to add some momentum to the share price.
The fund raising will test shareholder tolerance for the company given the decline since June 2018 when the shares peaked at $2.47. They ended at $1.04 last Friday.