Here’s why the Amaysim Australia Ltd share price soared 24% today

What: Shares of low-cost mobile provider Amaysim Australia Ltd (ASX: AYS) soared 24% this morning after the group announced a key acquisition to the market.

So what: In a statement to the ASX, Amaysim detailed the $70 million acquisition of Vaya Pty Ltd, a Brisbane-based Mobile Virtual Network Operator with 140,000 active subscribers.

Vaya operates the Vaya, Live Connected and Zen Connect brands in the low-cost mobile product market, similar to Amaysim’s mobile offering. According to Amaysim’s ASX release, a majority of Vaya’s subscribers are on its $18 per month package.

Now what: Amaysim CEO, Julian Ogrin, said, “The Vaya Group presents an attractive and financially compelling opportunity to advance our strategy for profitable growth.”

Using a dual-branded strategy, Amaysim said the acquisition will enable the combined business to access new markets, increase scale and drive operational leverage. “The transaction will build on amaysim’s position in a consolidating market, enhance the company’s scale and leverage its online platform,” Mr Ogrin said.

The $70 million purchase will be paid from a combination of $5 million cash, $15 million in Amaysim shares and require Amaysim to take on $50 million of debt to Optus, the carrier network for both Amaysim and Vaya. Amaysim says Vaya will benefit from better access to wholesale network pricings, yet the deal won’t be dilutive to Amaysim’s profit margins.

“This is a rare opportunity to significantly grow our number of subscribers on the same network and in a complementary market segment,” Mr Ogrin added.

While not immediately profit accretive, Amaysim says the transaction “is expected to be materially accretive on an underlying NPATA basis for Amaysim shareholders in FY17.”

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Motley Fool writer/analyst Owen does not have a financial interest in any company mentioned.

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Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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