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Bevan Slattery-founded Superloop (ASX: SLC) made its name as a fibre network builder and operator providing cloud services to businesses and consumers, but now the Brisbane-based group is bolstering its burgeoning home broadband segment with the $110 million acquisition of Exetel.
The deal means Superloop is betting more than its entire revenue in FY20 on Exetel, Australia's largest independent internet service provider (ISP) which is forecasting EBITDA of $11 million this financial year.
Superloop will raise $100 million in two fully underwritten placements to help fund the purchase, including a $49 million institutional offer to new and existing shareholders, as well as a $49 million entitlement offer.
This will be complemented by an additional $10 million for Exetel shareholders in the former of SLC shares at a price of $1.01 - just shy of yesterday's closing price, unlike the new share offerings which will be at a 10.6 per cent discount at 93 cents each.
The acquirer has something Exetel lacks as a reseller of products from Australia's leading telcos - infrastructure - while the ISP has a customer base of more than 110,000 that Superloop will be able to bring into the fold.
Superloop's home broadband revenue grew by a whopping 66 per cent year-on-year in the December half to $14.9 million, making it worth more than a quarter of total sales with a gross margin of 34 per cent.
The deal is expected to generate cost synergies of $5 million annually.
"The acquisition of Exetel Australia's largest private ISP adds significant scale to grow profitable share of our three customer segments," says Superloop chief executive officer Paul Tyler, who took on the role in September last year.
"Integration of Exetel into Superloop's existing networks brings super fast, super easy and super reliable connectivity to three times more homes and businesses."
Exetel is expected to record $150 million in revenue this financial year, while Superloop maintains its EBITDA forecast of $18-18.5 million.
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