Uniti confirms talks with Morrison & Co for $3 billion takeover

Uniti confirms talks with Morrison & Co for $3 billion takeover

South Australian telecommunications company Uniti Group (ASX: UWL) has today confirmed it is in talks with global fund manager HRL Morrison & Co for a $3.08 billion takeover, following media speculation about the deal from this morning.

Uniti stressed the proposal was in early stages, with discussions between the two parties non-binding, preliminary, highly conditional and uncertain as to an outcome.

At this stage, Adelaide-based UWL says the Morrison & Co proposal is for an indicative price of $4.50 per cash, valuing the telecommunications company at more than $3 billion.

“The indicative proposal is subject to a number of conditions,” Uniti said.

“The board notes that it is uncertain that the indicative proposal will result in an offer to Uniti shareholders.

“Uniti will update shareholders, in accordance with the Company's continuous disclosure obligations, in due course. In the meantime, Uniti shareholders should not take any action in relation to the Indicative Proposal.”

Speculation on the deal from the press and the subsequent confirmation from Uniti has sent the company’s share price flying, up 27.30 per cent to $4.01 per share at the close of trade today - which is still below the company’s historic trading peak of $4.64 recorded in December last year.

The two parties remain in exclusive discussions as to a potential takeover, with the exclusivity period to lapse on 22 April 2022.

For UWL, the proposal comes after its achieved record half yearly results - announcing in February it generated $70.5 million in earnings over the six months to 31 December 2021 - up 140 per cent on the prior corresponding period.

The company says its recurring revenue is now more than 90 per cent of total revenue ($109.5 in 1H22), and earnings would have been higher were construction on the east coast not delayed by COVID-19 lockdowns.

“Our commitment to our shareholders is to build a strong, sustainable company. We are doing that by continuing to win in market, building best-in-class fibre access networks and filling those networks with customers – ‘Win, Build, Fill’ remains our core strategy,” said UWL CEO Michael Simmons, a major shareholder in the company who stands to receive around $21 million if the Morrison & Co deal goes through.

“Our results for the first half of FY22 again illustrate the exceptional platform we have built, delivering high growth from purely organic endeavours, whilst expanding margins, building our operating leverage as we increase the number of active premises, providing protection against macro inflationary pressures.

“Well over 90 per cent of our earnings are now generated from high margin, recurring, annuity revenues which are delivered predominantly on our owned super-fast FTTP networks, and this ratio will continue to expand as our contracted FTTP order book of nearly 300,000 premises deploys over the years ahead.”

The company was co-founded in 2014 by Sasha Baranikov and Che Metcalfe, who were fired shortly after Uniti's 2019 initial public offering *IPO(.

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