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New twist in 5G Networks (ASX:5GN) takeover of ASX-listed Webcentral

A businessman in a suit and wearing boxing gloves, slump in the corner of a ring, indicating a corporate fight between ASX companies
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The continuing saga involving the 5G Networks Ltd (ASX: 5GN) acquisition of Webcentral Group Ltd (ASX: WCG) took another twist today.

5G Networks advised that the Australian Takeovers Panel had received another application from Webcentral’s key shareholder, Keybridge Capital Limited (ASX: KBC).

This is the second application from Keybridge, claiming that 5G Networks used coercive tactics to pressure Webcentral’s shareholders into selling.

At the time of writing, the 5G Networks’ share price has dropped 6% to $1.32, while the Webcentral share price is down 19.17% to 48 cents. Meanwhile, shares in Keybridge have been suspended from trading on the ASX since 2019.

Here’s the background behind the takeover

In November 2020, 5G Networks completed its scrip-for-scrip takeover of Webcentral, after acquiring 57% of the listed shares. 5G Networks installed its own chief executive, Joe Damase, to the top job at the digital marketing company, leading Webcentral’s board members to quit en masse.

The takeover came after objections raised by Keybridge to the Takeovers Panel a month earlier in October 2020. Keybridge accused  5G Networks of breaching the Corporations Act by using “coercive shareholder pressure” on Webcentral’s shareholders.

Keybridge claimed that prior to the takeover bid, Webcentral and 5G Networks had knowingly agreed to pay a $1.9 million success fee to a financial adviser if a 50.1% interest was achieved.  However, Keybridge argued this had not been disclosed in Webcentral or 5G Network’s bidder statements.

In its submission, Keybridge asked the Takeovers Panel for Webcentral shareholders to be “provided with withdrawal rights under the 5GN bid, or the bid be withdrawn”.

The panel at the time decided not to pursue the claims, which opened the path for the formal takeover to take place in November.

Today’s release confirmed that Keybridge has made another submission to the panel, in an effort to overturn the earlier decision.

A better rival offer

Keybridge owns 6% of Webcentral, and preferred a rival bid that valued Webcentral at 18 cents a share. This compared to 5G Network’s effective valuation of 14 cents a share.

Keybridge Capital has been suspended from trading on the ASX since 2019, after the corporate regulator ASIC found wrongdoing by its chief executive Nicholas Bolton. Bolton is currently back as the company’s chief after serving out his corporate suspension. 

Webcentral itself is a shadow of its former self. The company boasted a market capital of $440 million only three years ago, and is now worth $93 million.

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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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