On Wednesday, 3 April 2019, Spirit Telecom Limited announced the acquisition proposal to take over a complementary unlisted business, LinkOne.
In the release to the Australian Securities Exchange, Spirit Telecom Limited (ASX: ST1) announced that it has inked an agreement to acquire 100% of LinkOne at an upfront consideration of A$5.7 million, comprising both cash and scrip component.
LinkOne is a wholesale licensed telecommunications carrier operating a predominantly Fixed Wireless network. The takeover includes the acquisition of 100% interest in all the LinkOne Group of Companies including Anttel Communications Group Pty Ltd, LinkOne Pty Ltd, Ignite Broadband Pty Ltd and Wells Research Pty Ltd.
The acquisition of LinkOne is expected to enhance Spirit’s existing channel partner offering through expanding its presence in Brisbane and Sydney, together with providing a strong platform for ongoing expansion of the Spirit network. Moreover, the acquisition of LinkOne is expected to be highly earnings accretive which has the potential to add significant value to Spirit.
Spirit’s Managing Director, Geoff Neate said, “The acquisition of LinkOne is geographically complimentary in Melbourne and brings an instant accretive expansion into Sydney and Brisbane to Spirit. This is an exciting acquisition that has been over 6 months in the making and brings a growing business, managed by a smart team, into Spirit’s stable. CEO Todd Maunder will join the Spirit team, focused on network expansion and acquisition and will bring another level of thinking and innovation to Spirit.”
The 70% of consideration that makes to $4.0 million will reportedly be paid in cash while the remaining 30% or $1.7 million will reportedly be paid via the issue of approximately 13.1 million Spirit Telecom Shares at $0.13 to LinkOne shareholders. The consideration, however, is to be partially funded by the capital raising program of the company via Institutional placement and Share Purchase Plan (SPP).
Spirit has received strong support of institutional, professional and sophisticated investors to raise A$4.2 million, before costs, through the issue of 35 million ST1 shares at $0.12 per share via placement. In addition, the company has planned to offer all existing eligible investors the opportunity to subscribe for new shares through a Share Purchase Plan (SPP). The SPP will be capped at A$1.0 million with a maximum subscription of $15,000 per investors, subject to the record date of 2 April 2019.
The acquisition represents a multiple of circa 5x EV / EBITDA for the 12 months to 31 December 2018. This underscores the LinkOne’s business highlights of 570 customers, with business customers accounting for circa 90% of revenue, 44 PoPs, and network infrastructure that utilises complimentary hardware and co-located Australian data centres.
Spirit expects the LinkOne acquisition to close in late April 2019, subject to the satisfaction of customary closing conditions.
ST1 stock price plunged by 21.87% to last trade at $0.125 on 3 April 2019. Over the past 12 months, the stock has witnessed a negative price change of 36.0% including a decline of 5.88% in the past three months.