Uniti pays high price in pursuit of OptiComm after FSS bid
SA telco Uniti has moved fast to gain an advantage in its fight with megafund First State Super to gain control of Victorian company OptiComm, but it has been a costly move.
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Adelaide telco Uniti’s “blocking stake” in takeover target OptiComm and matched $609m bid may thwart further attempts by rival bidder First State Super, but it hasn’t scored a bargain, analysts say.
Uniti on Friday detailed the additional $30m it paid and the new 5m shares it issued to boost its stake in OptiComm to 19.5 per cent, following an unsolicited bid from FSS.
As Uniti managing director and chief executive Michael Simmons told investors this week the company has “sought to own” OptiComm, which provides internet connection services to property developers and retail service providers, for some time.
“It is by now well understood the combination of the Uniti and OptiComm businesses is both highly strategic and synergistic,” Mr Simmons said.
OptiComm’s board has recommended Uniti’s latest offer, which is subject to a number of approvals and an independent expert’s evaluation.
Morgans Unley senior investment advisor Henry McQuinn said the deal, if successful, will give Uniti the earnings growth it craves.
“But the long term outcome is not so clear; it is impossible to view the deal as a bargain given the price they have now been required to pay,” Mr McQuinn said.
Morgans, a retail stockbroking and wealth management business was the lead manager and underwriter when OptiComm floated on the Australian share market just over a year ago.
“Whatever the outcome, the big winners have been OptiComm shareholders, having tripled their money in a little over a year,” Mr McQuinn said.
“While it is possible that First State lifts it bid, given their lower cost of capital, it seems unlikely now to succeed given Uniti has secured a stake of 19.5 per cent in OptiComm via shares and options. This will act as a blocking stake.”
It is also widely expected that superannuation funds will become more active on the corporate front given the persistent decline in cash rates and lowered investment return expectations, generally, he said. For FSS, OptiComm's assets are seen as “highly valuable” given its resilient business model, with a high proportion of recurring, utility-like revenue, which matches nicely with the long term return requirements of a superannuation,” he said.
Uniti announced it’s initial $532m cash-scrip bid – its biggest takeover yet – on June 16, a deal that would push Uniti’s market capitalisation past the $1b mark. However, days before a vote on the offer, FSS launched a competing bid. A court hearing next Friday will set a new date for the vote.