Australian telecommunications company 5G Networks (ASX: 5GN) has purchased the direct business subsidiaries of technology solutions provider Inabox (ASX: IAB) in a $5.7 million deal designed to expand 5GN’s geographical reach and customer base.
Under the terms of the transaction, 5GN has acquired Inabox brands Hostworks and Anittel on a cash-free and part debt-free basis, giving it access to one of Australia’s largest cloud providers in terms of technical expertise and national reach.
The acquisition has been fully-funded from 5GN’s existing cashflows and has added A$43m of revenue to the company’s books.
After allowing for working capital and debt-like items assumed by 5GN, Inabox will receive cash consideration of A$2.0m from the sale, with net proceeds applied to the repayment of Inabox’s debt facilities.
Nationwide office network
The acquisition is a significant step in 5GN’s strategy to expand its geographical footprint, allowing the company to have a network of offices in seven Australian capital cities as well as in regional areas across New South Wales.
An increased customer base will be serviced by a team of 200 staff nationwide, comprised of 5GN, Hostworks and Anittel employees.
The new profile will allow 5GN to fasttrack the rollout of its high-speed, cost-effective network to business customers across Australia.
Benefits to Inabox
The sale of Hostworks and Anittel will allow Inabox to focus on its Indirect Business unit, currently the company’s most profitable area of operations.
Generating revenues of more than A$50m per year, Indirect Business supplies wholesale, white-labelled telecommunications, billing and support services to over 450 retail service providers around Australia.
It also enables large retail brands to provide telecommunications services to their customers.
In June, Inabox disclosed it had been informally approached by parties interested in a range of transactions including the possible sale of the entire company and including the Indirect Business unit separately.
While Inabox continues to hold discussions regarding the possible sale of the Indirect Business unit, the company said there is no certainty that these discussions will result in a binding transaction.
“It’s exactly what we need”
5GN managing director Joe Demase said the Inabox acquisition represents “great synergy” with 5GN’s existing business.
“The acquisition of an established hosting and IT services business [and] necessary infrastructure will support growth and customer demand in [our] core business streams,” he said.
“We pursued this transaction because it is exactly what we needed to rapidly expand our core business streams.”
At mid-afternoon trade, shares in 5G Networks were steady at $0.58, while Inabox shares were trading 1.45% higher at $0.70.