Challenger telco and internet service provider Superloop (ASX: SLC) has proposed a $243 million acquisition of Symbio (ASX: SYM), a communications software-focused competitor that helped Skype launch in Australia in 2008 and has since expanded into New Zealand and Singapore.
Brisbane-based Superloop announced a non-binding offer valuing Symbio at $2.85 per share after the market closed yesterday, representing a 21 per cent premium to its last price through a deal split fairly evenly between cash and scrip.
The board of Symbio and its advisors have undertaken a review of the indicative proposal and have entered into non-disclosure and exclusivity agreements with the suitor for a four-week period.
Superloop's board believes the proposed transaction would create a 'leading telecommunications company with a compelling breadth of services and strengthened customer proposition'.
The news also comes as both companies have reaffirmed high earnings expectations for FY23 with Symbio confirming it is on track to hitting the upper end of EBITDA guidance of $27-28 million, while Superloop now expects to exceed underlying EBITDA guidance by $1 million at $37 million.
"The proposal that Superloop has made to potentially acquire Symbio represents an excellent proposition for all stakeholders and the combination of Superloop and Symbio would create a strong and attractive telecommunications business," says Superloop CEO and managing director Paul Tyler.
"Superloop and Symbio currently have an excellent working relationship, with Symbio being one of Superloop’s largest wholesale clients, and the combination of the two businesses would be highly accretive."
Based on recent share prices, if the two companies merge the combined entity would have a market capitalisation of roughly $562 million.
Symbio was founded in Sydney by Rene Sugo and Andy Fung who predicted Voice over Internet Protocol (VoIP) would replace traditional cooper phone networks. Within six years of establishment, it listed on the ASX and completed its Australian network, helping to facilitate the entry of Skype and other VoIP pioneers into the market.
In the mid-to-late 2010s, the company was in acquisition and expansion mode, buying TNZI - formerly Telecom New Zealand International - and telco-as-a-service Telcoinabox, completing its networks in New Zealand and Singapore in 2017 and 2021 respectively.
The company's fully interconnected multi-regional network gives clients voice and SMS coverage in Australia, New Zealand and Singapore, and its partners include Microsoft, Google, Cisco, Zoom, Twilio, RingCentral and AirCall.
In the second half of 2022, Symbio was granted a tier-two license in Malaysia, allowing it to start trading in the country and complete its network build for an organic market entry. The group is aiming for a tier-one license there, while elsewhere in Asia it is engaged in discussions with regulators, potential M&A targets, and tier-one carriers in Taiwan.
"We remain confident that the global megatrends of enterprise cloud adoption and new ways of working, including hybrid working, will prevail through the current period of uncertainty," CEO and co-founder Rene Sugo said in February.
"Our expansion into the new high-tech Asian markets of Singapore, Malaysia and Taiwan will increase our addressable market further fueling long-term growth."
Superloop also has a history in connecting Australian cloud infrastructure with Asia, as its subsidiary SubPartners played a key role in building the INDIGO subsea cable project connecting Australia with Singapore.
Last year the company, which was founded by serial internet infrastructure entrepreneur Bevan Slattery, offloaded its Hong Kong subsidiary and certain assets in Singapore for $140 million, freeing up the balance sheet for investing in growth and acquisitions including the $15 million purchase of tech services firm Acurus.
In today's update, Tyler notes that Superloop has experienced stronger than anticipated organic trading performance in the second half of the year with all three trading segments performing ahead of expectations.
"We are very pleased with the performance of the business and the financial outcomes that are demonstrating the continuing success of Superloop’s turnaround. We are also very excited by the opportunities that lie ahead for Superloop in FY24 and beyond," he says.
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