Superloop’s move to bring Origin Energy in as a 14 per cent shareholder is a masterstroke when it comes to defence, with the move likely ending Aussie Broadband’s chances of buying its rival.
Superloop looks set to land a six-year contract with Origin providing wholesale internet services to its customers, and it’s partly paying for the arrangement with shares in its own company.
Not only will the deal add more than $19m of annual earnings before interest, tax, depreciation and amortisation, it means if Aussie Broadband bids for the company by way of a scheme of arrangement, where shareholders vote on the proposal, then Origin likely has enough of a holding to prevent a transaction going through.
Origin has previously communicated its ambition to grow its broadband customer base to 600,000 subscribers by the 2026 financial year, and the way it’s tracking so far, it looked unlikely to get there.
But this deal is a way that it can hit that goal.
This transaction that sees Origin customers leaving Aussie Broadband is likely to hurt for the latter, which says in its announcement to the market it only learned of the contract loss on Wednesday night, and analysts estimate a hit to its earnings of about 10 per cent.
Its shares on Thursday plunged 17 per cent on the news, whereas Superloop’s share price exploded by 24 per cent to $1.30, taking its market value to $515.7m.
For Aussie Broadband to buy Superloop now, it really need to put about $700m of cash on the table.
That’s a far cry from the $466m it offered for the business last month.
The earlier scrip bid of 0.21 Aussie Broadband shares for each Superloop share held equated to 95c a share, and at that time, before the bid was rejected by Superloop, shareholders thought a deal worth $1.05 to $1.15 made more sense.
But that was before the Origin win.
Aussie Broadband adviser Goldman Sachs is now likely doing some serious thinking about what comes next after the play by Superloop, advised by Barrenjoey and Luminis Partners.
The logic for Aussie Broadband’s bid was creating a scale player in Australia, with more than 1 million internet subscribers, a greater reach and network infrastructure, along with brands in Aussie Broadband, Superloop and Exetel.
Yet complicating matters for another suitor to come forward is that the $1bn Aussie Broadband has purchased a 19.9 per cent stake in Superloop as part of its approach.
Perhaps now Aussie Broadband offloads that stake.
Superloop was founded by Queensland tech tycoon Bevan Slattery, who stepped down as chairman in 2021 and sold his holding of about 25 per cent.
The business provides connectivity services, design services, and constructs and operates networks throughout the Asia Pacific region, so strong synergies exist between the two companies.
Superloop needs to add to its growth prospects and its own organic growth, and had been tipped to make acquisitions itself.
Last month, some quested whether AGL Energy and Origin Energy, the group’s biggest wholesale customers, bid for the company, although that now looks off the table.
Appen
Meanwhile, shares in US-listed Innodata rallied on news that it had withdrawn its offer for Australian listed data company Appen, advised by Barrenjoey.
The reason given was that the 70c a share scrip offer that valued the target at $153m was intended to be confidential.
But the sell off in Innodata’s share price the day before said it all, clearly showing its shareholders were unhappy about an acquisition of the business.
Appen shares crashed 17 per cent, taking its market value to $175m as its future now hangs in the balance.
Qantm
Elsewhere, Qantm shareholders were believed to have applied pressure on the company this week to engage with the Gresham-advised private equity firm Adamantem Capital over its $254m bid for the business at $1.817 a share.
The bid is seen as a solid premium to where the intellectual property has been trading – now that it has exclusive due diligence it just needs to be proved up.
The other suitor, Rouse International, never disclosed its price but it was inferior to the Adamantem offer and wasn’t prepared to match it, so it’s out of the data room.
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