Over the Wire (ASX:OTW) share price leaps 12% on Monday

Over The Wire shares are rising after receiving a takeover offer.

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The Over The Wire Holdings Ltd (ASX: OTW) share price has gone up around 12% in early trading.

Last week, the ASX-listed telecommunications, cloud and IT solutions provider announced that it received a takeover offer from another ASX share.

Takeover offer for Over The Wire

Over The Wire announced on 22 October 2021 that it received an unsolicited, non-binding and indicative offer from Aussie Broadband Ltd (ASX: ABB) to buy the whole business.

The offer from Aussie Broadband is an amount of $5.75 per Over The Wire share.

At this stage, the discussions between the two telcos about the offer are preliminary and incomplete. No agreement has been reached about any transaction. The company also said that there is no guarantee that an agreement or transaction will happen.

More details on the current proposal

The Aussie Broadband takeover offer is $5.75 in total per share, but it’s actually a mix of cash and shares. The ratio of cash and shares is yet to be determined.

A process deed was entered into on 16 October 2021. Aussie Broadband is being provided with the opportunity to do due diligence and negotiate transaction documentation over a period ending on 30 November 2021.

Over The Wire has agreed to certain exclusivity and notification provisions during this period.

What happens next?

Shareholders get the chance to react to this news. As mentioned, the Over The Wire share price is currently up around 12%. However, the board advised shareholders not to take any action about this proposal.

Over The Wire said it would keep shareholders involved of any other developments. It has appointed Macquarie Group Ltd’s (ASX: MQG) Macquarie Capital as financial adviser and McCullough Robertson as legal adviser.

The offer is subject to various conditions, including completing due diligence and entering into a satisfactory formal agreement.

How is the Aussie Broadband share price performing?

This morning, Aussie Broadband shares are flat. However, over the last six months it has gone up around 60%.

In a recent update for the first quarter of FY22, Aussie Broadband said that its overall broadband connections increased 11% quarter on quarter to 396,328. Business broadband connections grew 13% quarter on quarter to 39,993. Year on year, total broadband connections rose 44%.

Total connections rose 13% quarter on quarter to 576,698.

The FY22 first quarter revenue grew 11.3% quarter on quarter to $111.4 million.

Aussie Broadband said that it was expecting broadband net additions of 53,000 to 60,000 for the second quarter, including the migration of 20,000 white label services. The company said it’s typical to see a slow down over the Christmas period.

The broker Ord Minnett currently rates the Aussie Broadband share price as a buy and rated the Over The Wire share price as a buy prior to the takeover offer.

Ord Minnett thinks this deal would be a good move for Aussie Broadband’s expansion of its corporate segment.

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Motley Fool contributor Tristan Harrison 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 Aussie Broadband Limited and Over The Wire Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Aussie Broadband Limited and Over The Wire Holdings Ltd. 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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