Superloop (ASX:SLC) shares remain halted amid cap raise and acquisition

The company’s shares won’t be going anywhere until tomorrow after it revealed a $100 million capital raising and telco acquisition.

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Man drawing illustration of a big fish eating a little fish representing a takeover or acquisition.

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The Superloop Ltd (ASX: SLC) share price remains frozen today after the company revealed the details of its proposed acquisition and capital raising.

Superloop shares are expected to resume trading on Wednesday 9 June, pending the completion of the company’s placement and institutional entitlement.

Superloop to acquire Exetel

Superloop shares will be in focus when they resume trading after the company advised it will be forking out $100 million in cash and an additional $10 million in Superloop shares to acquire Exetel Pty Ltd. Exetel is Australia’s largest independent internet service provider.

Exetel will bring with it more than 110,000 consumer and business customers. With a post acquisition customer base of more than 155,000, Superloop expects the acquisition to accelerate its growth trajectory and provide the necessary scale for it to be a major provider in the Australian marketplace. Superloop also believes the addition of Exetel customers will accelerate the utilisation of its infrastructure assets, resulting in greater operating margins.

From an earnings perspective, Exetel forecasts FY21 revenue of more than $150 million, 95% of which is recurring revenue, and earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $11 million.

The acquisition announcement also highlighted that the combined group will realise $5 million in annualised synergies and cost savings. Cost reduction from external wholesale services is expected to commence immediately, with full cost savings expected to be achieved within 12 months.

The combined group expects FY21 EBITDA to jump 89% from $18 million to $34 million. This is comprised of $18 million EBITDA from Superloop, $11 million EBITDA from Exetel and $5 million in expected synergies.

Superloop will fund this acquisition with a $100 million capital raising at 93 cents per new share. The offer price represents a 10.6% discount to $1.04 the Superloop share price closed at on 4 June.

Superloop share price snapshot

Its been a flat year for the Superloop share price, currently trading at $1.04 and starting the year off at $1.06.

The company has struggled to inspire the market despite a solid half-year results announcement that delivered a 3.8% increase in revenue and an improvement in net losses. The Superloop share price slumped almost 9% to 95 cents on the day of the release.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended SUPERLOOP 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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