A junior cloud provider one-third owned by NextDC is in acquirers’ sights

An underperforming cloud services provider one third-owned by NextDC has found itself the target of competing takeover bids.

Cloud computing and security services firm AUCyber is in play.

A takeover battle for cyber security and secure cloud business AUCyber - which is 32 per cent owned by NextDC - has kicked off, with acquisitive private tech firm Brennan launching a rival bid to 5G Networks’ initial offer.

The bidders pitched their offers as the company’s shares languish near 12-month lows, with Brennan offering 14c to 5G Networks’ 11c.

The stock has traded as high as 62c over the past year but was recently changing hands for a little more than 10c after telling the market it would miss its previous earnings forecast, and with the managing director Peter Maloney first resigning and shortly thereafter being terminated earlier this month.

AUCyber completed a four-way merger in May, 2024, combining AUCloud, PCG Cyber, Venn IT and Arado into one entity.

While raising capital to fund the acquisitions in March, AUCyber said all of the companies being acquired were independently profitable in the first half of the 2024 financial year, and post-completion the company’s annual recurring revenue rate would be about 84 per cent.

Listed cloud infrastructure company NextDC committed to take up $12.6m of the $30m offer.

Wilson Asset Management also owns 4.2 per cent of AUCyber while Alex Waislitz’s Thorney Investment Group also has a modest stake.

But in early December AUCyber told the ASX the newly formed group was performing below expectations, and withdrew its earnings guidance for the current financial year.

AUCyber had been forecasting revenue of $36.6m for the full year and EBITDA of $4.7m.

For the four months to the end of October the company posted revenue of $8.3m and an underlying EBITDA loss of $1.3m, and withdrew its guidance on the basis that this run rate was below forecast.

“Revenues in the cyber security, cloud solutions and managed services businesses have all fallen short of expectations, principally due to slower than expected new customer uptake during the period of integration, in addition to recent customer churn,’’ the company said on December 4.

AUCyber had $5.7m in cash at the end of October.

5G Networks on December 20 lobbed an 11c per share cash, on-market takeover bid for the company, which was pitched at a modest 7.3 per cent premium to the then share price, and virtually no premium to the five day average.

Morgans is acting for 5G Networks, and will buy shares on-market at the offer price, with 5G having already acquired 10.74 per cent of the company’s stock from institutional shareholders.

5G Networks says it operates a high-speed data network across Australia, as well as cloud and data centre operations.

It is chaired by Hugh Robertson from Morgans Financial.

Brennan, founded by Dave Stevens in Sydney in 1997, has been acquisitive over its history, buying Queensland's iExec in 2005, Newcastle-based Forsythes Technology in 2021, Clade Solutions and MOQdigital in 2022 and Adelaide’s Nuago this year.

Nuago at the time of its acquisition in July had 60 staff and annual of more than $25m.

AUCyber released few details of the Brennan offer, but told shareholders to take no action of the 14c per share cash offer while it assessed both proposals.

The Brennan offer is subject to due diligence and credit approval from Brennan’s existing lender.

AUCyber said it had appointed Latimer Partners as its financial adviser and Baker McKenzie as legal adviser.

AUCyber shares were 13.1 per cent higher at 14.7c on Tuesday.

Originally published as A junior cloud provider one-third owned by NextDC is in acquirers’ sights