Superloop to be NBN challenger for business
Superloop chief executive Bevan Slattery wants to seriously challenge the National Broadband Network's pitch to enterprise customers, which he says require more bandwidth than households. "The NBN is good because it will have good coverage when it's finished and a good baseline speed, but enterprise clients use a fair bit of bandwidth, so that's where alternatives become more attractive," he said. The serial entrepreneur was speaking after the dark fibre telecommunications company said it would buy wireless and IT services provider BigAir Group for up to $205 million, in a deal first revealed by Street Talk on Tuesday afternoon. The deal will be funded by either scrip or scrip and cash. Under the all scrip offer, BigAir shares are valued at $1.13, a 43 per cent premium to the one month volume weighted average price, and under the mixed alternative BigAir shareholders are offered 70¢ cash and 0.118 Superloop shares for every BigAir share.
Mr Slattery, who has listed four companies and been heavily involved in a fifth, said the acquisition would help Superloop accelerate the construction of its network and give it the ability to offer businesses wireless connections to the high-speed fibre network through BigAir's wireless local area network (LAN) technology. This acts like a router and uses electromagnetic radio waves to transmit and receive data over the air for an area of 1-4 kilometres, without the need for a physical connection to the network. Oversubscribed "We can supercharge BigAir's network and propel it to be a strong product in the market," he said. "Superloop will now be the only carrier with its own fibre to enterprises building business ... and it will also have a supercharged new last mile alternative in city and regional areas ... and we're going to rebrand BigAir's managed services business." The total cash consideration in the deal is up to $95 million, which will be funded by an oversubscribed $65 million share placement and a $75 million debt facility BigAir shareholders have welcomed the acquisition bid, pushing BigAir's share price up 23.8 per cent to $1.04 on Wednesday. Milford Asset Management portfolio manager William Curtayne said the premium price offered for BigAir shares was reasonable, but the real value of the deal comes down to how shareholders view Superloop. "We have a positive view on Superloop given its assets in Singapore, Hong Kong and Australia. Our conclusion is that it's very positive overall and we believe the combined entity will be stronger," he said. "On a cross synergy basis there should be some savings where BigAir can leverage some of Superloop's assets, but the biggest upside will be the revenue synergies through the enhanced sales proposition for a stronger asset base." But Superloop investors were not as pleased, pushing its share price down 7.9 per cent to $3.05 on the back of the premium price the company has committed to pay for BigAir. The stock is still up 205 per cent on its issue price of $1 after 15 months as a listed company. The deal is still subject to approval, but it is expected to be finalised on December 23. Mr Slattery said the company would achieve $4 million-plus in cost savings each year through the acquisition, saving on things such as data centre space. Regulatory applications "We might end up with three, four or five racks in the same data centres, which we won't need," he said. "The integration of the data centre consolidation process will take place for six to nine months." Mr Slattery said Superloop is already the only telecommunications provider with its own fibre infrastructure connecting enterprises in Singapore, Hong Kong and Australia, but going forward it wants to be the leader across the whole Asia Pacific. "We've looked at the business case for expansion into five or six countries, but we'll make a decision on that early next year," he said. "We might make some regulatory applications [before then] to put a toe in the water." Credit Suisse upgraded its target price for BigAir on the back of the deal announcement from 90¢ to $1.21 and research analyst Jack Briggs said the deal would likely be approved. "As we believe the deal will go ahead and see low probability of a superior bid, we set our TP to the price implied by the higher of the consideration options," he wrote.
SLC Price at posting:
$3.04 Sentiment: None Disclosure: Held
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