A two-way tussle between Macquarie’s (ASX: MQG) Connect Consortium and global fund manager HRL Morrison & Co is coming to close after South Australian telco Uniti Group (ASX: UWL) backed the latter’s $3.62 billion bid today.
The deal comes almost a month after HRL Morrison & Co started talks with Uniti for a $3.08 billion takeover. A bidding war for control of Uniti ensued when Macquarie (ASX: MQG) entered the fold alongside the Public Sector Pension Investment Board last month with a $3.4 billion bid.
In response, the initial suitor raised its bid to $5.00 per share after joining forces with Brookfield Infrastructure Group – representing a 58.7 per cent premium to UWL’s closing share price on 14 March of $3.33 per share.
“The value placed on Uniti by the Morrison/Brookfield Consortium is a testament to the strength of the Uniti business we have built over the last three years since our listing on the ASX in February 2019,” Uniti managing director and CEO Michael Simmons said.
“We are immensely proud of the achievements of the Uniti team and believe that under its proposed new ownership, Uniti will continue to build upon its now established place as a successful, growing participant in the market for high speed, high quality, fibre access networks.”
In an ASX update last month, Uniti noted the Morrison/Brookfield Consortium bid was essentially identical to Morrison & Co’s original offer, just with an increase in price and an added condition the telco did not further engage with the Connect Consortium.
The Morrison/Brookfield Consortium raised concerns the rival suitor may have gained access to confidential and sensitive information if granted the opportunity to conduct due diligence, mainly because of its 50 per cent stake in competitor telco Vocus.
After considering both proposals, Adelaide-based Uniti agreed to no longer engage with the Connect Consortium as a condition of its agreement with the Morrison/Brookfield Consortium.
The proposal comes after Uniti 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 year-on-year.
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 if construction on the east coast had not been delayed by COVID-19 lockdowns.
The scheme implementation deed is subject to a number of conditions, including a tick of approval from shareholders during a vote in July.
However, Uniti independent non-executive chair Graeme Barclay said the board is “unanimous” in its view to support the transaction.
“In making this assessment, the board, including independent directors, has carefully considered a range of matters including its view of the intrinsic value of Uniti taking into account the company’s current position and future prospects, and the certainty for shareholders of this all-cash offer,” he said in an ASX update today.
“We believe this transaction is a very good outcome for Uniti’s shareholders, and for stakeholders more broadly, including our customers, executives, employees and suppliers.”
Shares in UWL are up 2.8 per cent to $4.96 each at 12:22pm AEDT.
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