Aussie Broadband (ASX:ABB) share price on watch amid acquisition rumours

Could Aussie Broadband be joining the ASX acquisition trail?

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The Aussie Broadband Ltd (ASX: ABB) share price is in focus this morning after reports surfaced about a potential acquisition the company may be considering.

Aussie Broadband shares closed the session yesterday 6% in the red, coming immediately off its previous 52-week closing high on 18 October.

Here’s what we know the national telco carrier might be up to.

Speculation mounts on potential acquisition

There is intense speculation around Aussie Broadband putting the feelers out into the market, potentially in talks to acquire a complementary tuck-in to its portfolio.

The company gave hint at its acquisition plans earlier in the year when it raised $134 million through a share purchase plan and institutional placement.

As much was confirmed in the company’s quarterly activities report that was released two days ago, on the back of strong revenue and earnings growth for the quarter.

Aussie Broadband is purportedly in talks to buy IT telecommunications provider Over The Wire Holdings Ltd (ASX: OTW), a company that specialises in converged voice and data networks.

According to reporting from The Australian, the $1.1 billion valued Aussie Broadband is potentially targeting the $300 million telco company, as Aussie Broadband’s shares began to soar after first listing on the ASX around this time last year.

As it stands, Over the Wire currently trades at around 10 times EBITDA and just over 80 times earnings per share.

However, not all agree with the speculation. Some analysts reckon that a move to acquire Spirit Technology Solutions Ltd (ASX: ST1) may be a more pertinent one, given the synergies the business provides with Aussie Broadband’s operations, The Australian reports.

For instance, it is an IT support, cybersecurity and cloud storage business, whereas Over the Wire has more of a customer focus where it engages directly with customer sales.

Meanwhile Aussie Broadband is more a kind of broker and on-seller for the National Broadband Network (NBN).

What’s next for Aussie Broadband?

Whilst there is no concrete evidence the company is formally targeting Over the Wire, the pair has purportedly been in exclusive talks, according to sources familiar with the matter.

Yet, given management’s language on its quarterly update, combined with the capital injection obtained earlier this year, it stands to reason Aussie Broadband is on the acquisition trail.

Time will tell what unfolds from this particular situation, nonetheless, more will be revealed in the coming weeks and months regarding the potential acquisition.

Aussie Broadband share price snapshot

The Aussie Broadband share price has soared since listing around this time last year. It’s posted a year to date return of 135%, after rallying 134% in the last 12 months.

These returns have outpaced the S&P/ASX 200 index (ASX: XJO)’s climb of around 19% in that time.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. 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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