QIC launches $494 million takeover of Superloop

QIC launches $494 million takeover of Superloop

Internet infrastructure company Superloop (ASX:SLC) has received a takeover offer from a Queensland private capital group for $494 million.

The proposed deal would see QIC Private Capital, on behalf of its global infrastructure managed and advised funds and clients, acquire the Bevan Slattery (pictured) founded company for $1.95 per share.

Initially, QIC lodged a takeover bid with Superloop on 2 April for $1.90 per share. It has since upped the offer to $1.95, lodged on 26 April, 2019.

Superloop's closing share price upon receipt of the initial proposal on 2 April was $1.47 per share. Currently the company is trading at $1.81 per share and has a market capitalisation of $458.47 million.

The $1.95 per share offer falls well below the company's recent peak of $2.49 on 29 June 2018, and the group's all-time peak of $3.29 per share on 9 September 2016.

This revised proposal includes two alternative forms of consideration to Superloop shareholders: full cash or partial cash and partial scrip in a newly formed, unlisted entity.

Superloop says that it has determined that it is in the "best interests of shareholders" to grant QIC a period of three weeks to conduct due diligence on an exclusive basis.

This period commenced on 28 April, and may be extended by mutual agreement.

The company has not yet commented on whether shareholders should accept this proposal, not commented on whether it is good value for shareholders.

Superloop recently completed a $30 million equity raise to put towards future development plans.

This raise was the latest piece in the puzzle for a three-way play by serial entrepreneur Bevan Slattery, the founder of Superloop, Megaport, and its subsidiary SubPartners, NextDC, Asia Pacific Data Centre and PIPE Networks.

The $30 million raise was announced in conjunction with Superloop's future vision, called Superloop 2.0. When announced, CEO Drew Kelton said the company was on the frontier of something great for the company.

"We are now nearing completion of the transition phase and entering the leverage phase which will start to generate significant returns with expected strong growth in gross margin," said Kelton.

The company intends to deploy the new capital to strengthen its balance sheet, provide additional funding to allow Superloop to take advantage of new opportunities, and to provide general working capital.

Superloop is in the midst of a multi-national infrastructure build, connecting more than 275 key data centres in the Asia Pacific.

Its undersea fibre optic network as part of the INDIGO Consortium which stretches around the Asia Pacific is the company's main project. The group owns and operates over 640 km of carrier-grade metropolitan fibre networks in Australia, Singapore and Hong Kong.

Once the whole cable system is up and running it is expected to strengthen links between Australia and the fast-growing South East Asian markets, providing lower latency and enhanced reliability. Using today's coherent optical technology, the cable's two-fibre pairs will be able to support up to 36 terabits per second.

The INDIGO cable system will utilise new spectrum sharing technology so each consortium member will have the ability to independently take advantage of technology advancements for future upgrades and capacity increases on demand.

Superloop's revenue is generated from three operating segments: 1) connectivity, which includes revenue generated from the group's metro fibre networks in Singapore, Hong Kong, Australia, a fixed wireless network in Australia, and revenues related to the development of the INDIGO subsea cable network, 2) broadband, which includes revenues generated from Superloop WiFi for resorts & student accommodation and from Superloop Home Broadband, and 3) services, which includes cloud & managed services and security products.

On the same day that the raise was announced Superloop revealed its 1H19 results, demonstrating stronger revenue ($60.3 million, up 18 per cent) but a harsher loss ($8.73 million down 390 per cent).

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