5GN proposes to acquire all of the shares in Webcentral (which rebranded from Arq Group in June), at an implied price of $0.177 per share, to generate synergies across both businesses of over $7 million per year on a run-rate basis.
It will also provide a loan to Webcentral to allow the company to pay existing financiers the full amount outstanding under its debt facilities.
The acquisition is expected to be “transformational” for 5GN’s earnings, with its earnings per share expected to more than double on a pre-synergies basis, and further increased on a post-synergies basis.
In September, the telco acquired a 10.2% strategic stake in Webcentral, confirming it would use its expertise and asset base to improve the business’ performance.
5GN’s offer price is believed to represent an “attractive and significant premium” to a July scheme of arrangement between Webcentral and US digital marketing provider Web.com Group, which quoted an implied Webcentral price of $0.10 per share.
The Webcentral board had previously recommended shareholders vote in favour of the scheme in the absence of a superior proposal.
The board has since determined that 5GN’s bid constitutes a superior proposal and has given Web.com Group five business days to come up with a matching or higher offer.
5GN’s proposed acquisition and re-financing of Webcentral’s outstanding debt will be fully-funded by a $27.5 million share placement finalised this week to a range of new and existing investors.
The company issued approximately 15.28 million new shares at $1.80 per share to complete the placement, which will be combined with existing cash on balance sheet and a $14.5 million debt facility to fund the takeover.
Concurrent with the placement, 5GN founder Joe Demase sold 2.78 million shares representing 14.5% of his shareholding.
He will remain 5GN’s largest shareholder with a remaining interest in approximately 16.2 million shares, equivalent to approximately 15.3% of the ordinary shares of 5GN on issue post-placement.
Mr Demase said he sold the shares to satisfy a personal tax obligation and to fund 5GN performance rights which may be exercised in the future.
“I am a strong believer in the future prospects of [our] business and have no immediate plans to sell more shares,” he said.