Connectivity services provider, Superloop Limited (ASX: SLC) is currently in discussion with QIC Private Capital Pty in relation to the acquisition of Superloop by QIC.
Earlier on 2nd April 2019, the company received a non-binding, conditional and indicative proposal from QIC to acquire the Company for $1.90 per share. After that on 26 April 2019, the company received a revised proposal in which the offer price was increased to $1.95 per share.
Under the terms of the revised proposal, Superloop will be receiving the considerations in the form of full cash or in the form of partial cash and partial scrip in a newly formed, unlisted entity.
After carefully reviewing the proposal, the Board has come to the conclusion that it will be best for the shareholders if the company grants QIC Private Capital Pty a period of around 3 weeks to conduct due diligence on an exclusive basis. This will help in determining whether an acceptable binding transaction can be agreed or not.
The Exclusivity Period is going to start on 28 April 2019 which may be extended for an additional period by mutual agreement.
The company recently completed a Retail Entitlement Offer, raising approximately $8.4 million which will be used to strengthen the company’s balance sheet and for growth opportunities.
In the first half of FY19, the company’s revenues were recorded at $60.3 million, up 18% year on year basis. In H1 FY19, the company invested $40 Mn in property, plant & equipment and intangible assets including $15 million for the INDIGO subsea cable system, plus further capital expenditure on rolling out ‘RED’ national backbone connecting to NBN and expansion of Singapore & Hong Kong. In the past few years, the company has created a truly Asia Pacific network with 758 km of owned Fibre connected to 275 data centres & offices.
Growth drivers of Superloop include –
Demand for bandwidth in Asia Pacific– Increased data consumption, growth of cloud computing, drives demand for Superloop’s connectivity infrastructure
Optic fibre infrastructure – 758 km of optic fibre across Australia, Singapore and Hong Kong metro regions as at 31 Dec 2018; Superloop drives significant incremental gross margins from its network infrastructure
Strategic Sites – 275 data centres and offices connected with fibre across Australia, Singapore and Hong Kong metro regions plus further buildings in Australia connected through Fixed Wireless and NBN; Superloop monetises the significant transfer of consumer and business data between data centre sites
Fixed cost leverage –The company is capable of generating high margin returns on incremental capacity usage on our networks
Customers and contracts – Superloop is having long duration contracts, with the network effect driving a sticky customer portfolio and recurring revenue stream
In the last three months, the share price of SLC increased by 26.13% as on 2 May 2019. At the time of writing, i.e., on 3 May 2019, the stock of the company was trading at a price of A$1.905, up 5.249% during the day’s trade with the market capitalisation of ~A$458.47 million.
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