The Aussie Broadband Ltd (ASX: ABB) share price is now on watch after announcing plans to go on the hunt for acquisitions to grow and diversify its earnings.
What is Aussie Broadband doing?
Aussie Broadband has confirmed that it has raised $114 million from institutional investors, which was strongly supported by new and existing investors.
The issue price for these new shares was $4 per share, which represented a 13.6% discount to the last traded price, though it was only a 2.6% discount to the previous 10-day volume weighted average price.
Existing eligible regular shareholders will be given the chance to join in the capital raising with the $10 million share purchase plan – each investor can buy up to $30,000 of new shares.
What is it going to do with the money?
Aussie Broadband said that proceeds will be used to support growth through acquisitions, new business product and technology development and/or further fibre and network build.
The telco said that it has a strong and developing pipeline of acquisition opportunities. These potential targets are various sizes and come in the segments of residential, business and enterprise. It’s looking to make at least one acquisition in the first half of FY22, though discussions are at an early stage.
Aussie Broadband expects that the majority of the capital raised during this process will be used to make acquisitions.
Aussie Broadband Managing Director Phillip Britt
said: “There are promising opportunities to execute transformational acquisitions in the business segment that will complement and improve Aussie Broadband’s position in the market.
“We believe this will help us to continue delivering outstanding results for our shareholders and help the company to continue to change the telco game in Australia.”
Final thoughts on Aussie Broadband and the share price
The business is growing well. FY21 revenue was up 84% to $350.4 million. This was also 3.6% better than the prospectus forecast. FY21 underlying EBITDA (EBITDA explained
) was $19.1 million, an increase of 433% year on year and 55% ahead of the prospectus forecast.
Acquisitions could see the business add further scale, which is important in this era of the NBN.
July and August 2021 were strong months. FY22 could be another good year. I’m not sure how profitable the business can be in the future, so I’m happy to leave the investing regarding Aussie Broadband for other people with a higher conviction.
I do like the look of these ASX growth shares though.
