The Superloop Ltd (ASX: SLC) share price is going to be on watch after revealing that it’s buying Exetel.
What’s the Superloop deal for Exetel?
Exetel is Australia’s largest independent internet service provider for $110 million. There’s a split between $100 million in cash and $10 million in Superloop shares.
Superloop has decided to do this because it accelerates the utilisation of Superloop’s infrastructure assets through the acquisition of Exetel’s more than 110,000 consumer and business customers. It provides a range of plans and pricing across the NBN, fibre broadband, mobile and business telco services.
The estimated cost synergies are going to be approximately $5 million per year. This is related to the increased Superloop network utilisation, with all synergies expected to to be realised within the first 12 months.
Superloop said the transaction represents an implied FY21 enterprise value to FY21 forecast EBITDA (EBITDA explained) multiple of 10 times, before synergies, and 6.9 times after synergies.
The ASX company said the transaction is materially beneficial to key financial metrics including profit / earnings per share (EPS), EBITDA and free cashflow on a FY21 pro forma basis.
How is this going to be funded?
Management said that the acquisition is going to be primarily funded by a fully underwritten institutional placement of $49 million and a pro-rata accelerated non-renounceable entitlement offer of around $51 million.
The raising will be done at a price of $0.93 per share, which represents a 10.6% discount to the last closing price.
Management comments
Superloop CEO Paul Tyler said: “The acquisition of Exetel – Australia’s largest private ISP – adds significant scale to grow profitable share of our three customer segments.
“Integration of Exetel into Superloop’s existing networks brings super fast, super easy and super reliable connectivity to 3x more homes and businesses.”
Outlook for Superloop and the share price
For FY21, Superloop confirmed and tightened its EBITDA guidance range (excluding one-off transaction costs) to a range of between $18 million to $18.5 million.
It’s a big deal for Superloop considering its market capitalisation is only around $400 million.
I’m not sure if Superloop shares are worth pursuing at this stage. I don’t know how much organic growth it can achieve over the long-term.
I am focused on finding ASX growth shares and ASX dividend shares for my portfolio. I’m not sure if Superloop fits into either of these categories.
