MNF Group Ltd (ASX:MNF) share price up 2% on an acquisition

The MNF Group Ltd (ASX: MNF) share price is up 2.3% so far today after announcing an acquisition to the market.

MNF Group is going to acquire Inabox Group Ltd’s (ASX: IAB) telecommunications and enablement services business through the purchase of all of the shares of Inabox’s operating subsidiaries.

According to MNF, the acquisition provides services to over 500 wholesale customers throughout Australia.

MNF will pay an initial purchase price of $30.5 million payable in cash on completion, which is expected by the end of November 2018.

There will be a further potential earn-out of $3 million based on the successful commercialisation of enablement service offerings.

The acquired business will be debt free, although it will require working capital of $2 million from MNF, of which $1.5 million is expected to be cash.

The acquisition will require the approval of Inabox’s shareholders, so a general meeting will be held next month to vote on the transaction.

However, the Inabox Directors have already unanimously recommended the deal and have outlined that a total cash distribution of $0.80 per share could occur based on the full earn-out and that return would represent a 70% premium to the 3-month volume weighted average price (VWAP) of $0.47.

Unless a better offer comes through, it seems as though the deal will go ahead.

MNF CEO Mr Rene Sugo said “IAB performs a leading role in the Australian wholesale telecommunications market and brings considerable volume and scale to the MNF business. The company is also recognised as the leading provider of SaaS enablement services to the industry – strongly complimenting the MNF business”.

Foolish takeaway

Investors are clearly pleased with the acquisition and it seems to fit MNF’s strategy. Whilst the market doesn’t seem convinced about MNF’s Pennytel idea, I think MNF looks very attractive at the current share price for a long-term buy-and-hold.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. 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 Scott Phillips.

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