Uniti has bought Australia’s premier provider of ‘phone words’ to add to its stable of telcos
Uniti’s strategy of rapidly scaling up through acquisition shows no signs of slowing down.
SA Business
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Uniti Group has announced yet another takeover, this time lobbing a $78 million bid for Australia’s premier provider of “phone words’’.
Uniti has agreed to pay $58 million in cash and $20 million in shares for 1300 Australia, which provides “phone words” telephone numbers as well as 1300, 1800 and 13 voice services.
The bid will be funded with an $85 million equity raising at $1.62 per share, compared with the company’s price before the announcement of the deal which was $1.78.
The raising is likely to push the company’s market capitalisation close to half a billion dollars. Uniti said 1300 Australia would deliver “infrastructure-like” annuity returns, given that 99 per cent of its revenues were recurring, from loyal customers.
1300 Australia is Telstra’s official phone word partner and delivered full year earnings before interest and tax of $10.9 million.
“The board believes that the acquisition should deliver ... about 28 per cent EBITDA per share accretion in FY20, including certain identified cost savings,’’ the company told the ASX.
“1300 Australia’s Phonewords and priority numbers are licensed to its customers, creating long-term relationships, which, in the board’s view, reduces competition risk.’’
Since listing in February this year, Uniti has acquired fibre network operator LBNCo, Fone Dynamics, Call Dynamics, Pivit, ... and attempted to take over Spirit Telecom.
The LBNCo deal was funded with a $100 million capital raise.
Uniti chairman Graeme Barclay said in a statement that the 1300 deal was a “significant event” for the company, “delivering material, well-defended earnings and remarkably strong free cash flow’’.
“In terms of incremental earnings contribution, this acquisition is our largest to date and provides ‘infrastructure-like’ returns in our specialty telco services pillar, without the usually accompanying capital expenditure.
“This is a special business with material identified upside.’’
When Uniti listed on the ASX it was a fast broadband provider based on a model using line of sight towers to connect to customers.
It has since broadened out significantly into fibre internet products and broader telephony products.
The company generated controversy early on by announcing the sacking of its co-founders, Che Metcalfe and Sasha Baranikow on its second day of public life, and is still defending an unfair dismissal claim from Ms Baranikow.
The company’s shares have performed strongly, after dipping sharply from the offer price of 25c in the days after listing , to recover and hit a high of $1.90 in June.
At the last trading price of $1.78 the company was valued at $461 million. Under the placement, $43 million will be issued to institutional and sophisticated investors.
An entitlement offer to retail shareholders and institutions would raise the other $2 million.
Uniti made an underlying profit of $2.0 million last financial year and a net loss of $13.5 million once tax and significant items were factored in.
The company said that it had “positive and growing cash flow” at the time of the full year results, and said revenue had grown 260 per cent to $14 million.