Superloop cruels Aussie Broadband takeover bid with Origin Energy tie-up

Shares in broadband provider Superloop soar 25 per cent after poaching Origin Energy’s wholesale internet contract from rival Aussie Broadband.

Superloop has effectively killed a takeover bid from rival Aussie Broadband after securing Origin as not only an investor but a distributor for its internet plans.

Superloop has effectively killed a takeover bid from rival Aussie Broadband after securing energy giant Origin as not only an investor but a distributor for its internet plans.

Superloop won the contract to supply Origin Energy customers with internet services from Aussie Broadband, a move that is expected to lift its annual earnings by $19m from next year.

The contract win sent Superloop’s shares soaring ▲ 25 per cent to $1.31 on Thursday, giving it a market value of $643.4m. Conversely, Aussie Broadband’s dived ▼ 18 per cent to $3.55 – a six-month low.

It comes after Superloop rejected an “opportunistic” $466m takeover bid from Aussie Broadband last month.

Superloop sweetened the Origin contract with an equity deal that involves issuing the energy company with almost 20 million shares in two tranches. Origin will also have the opportunity to receive up to $30m worth of Superloop shares, subject to achieving customer growth milestones.

The broadband deal is an exclusive six-year contract to provide internet services to Origin customers, which currently total about 130,000. Chief executive Paul Tyler said this is expected to increase Superloop’s customer base to about 560,000, the company said.

“Securing the Origin contract is a key progress milestone in Superloop’s three-year growth strategy. It delivers a step-change in our customer numbers and cements our market position as a leading wholesale broadband and backhaul provider,” Mr Tyler said.

“In order to create strong alignment and pursue growth in broadband customers, we are delighted to welcome Origin as a shareholder and to issue it an option to acquire further shares.”

Mr Tyler tightened Superloop’s earnings guidance from $49-53m to $51-53m. He said the company currently expects underlying earnings before interest, tax, depreciation and amortisation of 60-70 per cent next year, which includes the contribution from the Origin contract.

The contract is expected to add more than $19 million of annualised EBITDA once the current subscriber base is fully transitioned, and Superloop is expecting further upside based on Origin’s target to lift its broadband subscriber base to 600,000 by 2026.

Aussie Broadband managing director Phillip Britt said he was disappointed the company could not renew its contract with Origin.

“However, as a company, we have always been disciplined in ensuring every contract delivers value to our shareholders while also ensuring we can maintain a high quality service offering for customers.

“In the case of Origin it became clear that, given the contract parameters they set us, we would not be able to meet either of these objectives.

“We took the view that it was important that a disciplined approach to assessing contracts and how capital is deployed is critical. We will continue to carefully assess wholesale opportunities and grow this part of the business as we have for the last several years.”

Origin head of retail Jon Briskin said new broadband customers contributed to Origin reporting customer growth at the fastest rate in two and a half years in the half-year ended 31 December 2023, as more households take up bundled electricity, gas and broadband offerings.

“We have seen significant growth in our broadband business since we established it in 2018 and our focus now is on integrating market-leading broadband services with Origin’s strengths in electricity, gas and customer experience, providing customers with the simplicity of bundled services for their home,” Mr Briskin said.

“Our agreement with Superloop will support Origin’s broadband growth strategy and help deliver value as we focus on growing customers and our breadth of offering consistent with our ambition to provide unrivalled solutions to customers.”

Aussie Broadband lobbed a $466m takeover bid for Superloop last month to bolster its share of a market dominated by Telstra and Optus. The company made the move after it had acquired a 19.9 per cent stake in Superloop, purchasing shares at 95c.

The non-binding indicative proposal would have seen Superloop shareholders given Aussie Broadband shares at a ratio of around one to five. A successful takeover would have brought Aussie Broadband’s NBN market share to 11.8 per cent, cementing the growing telco’s place as Australia’s fourth largest NBN wholesale provider, analysts said.

Originally published as Superloop cruels Aussie Broadband takeover bid with Origin Energy tie-up