Paul Everingham has revealed his intention to leave Cirrus Networks if shareholders vote in favour of appointing two directors from unsolicited bidder Webcentral Group.
Paul Everingham has revealed his intention to leave the board of Cirrus Networks if shareholders vote in favour of appointing two directors from unsolicited bidder Webcentral Group at an upcoming meeting.
He noted his plans in a long letter to shareholders today, a few weeks after Melbourne-based Webcentral Group said it would seek the removal of three directors from the local IT services firm which it is hoping to acquire for 3.2 cents per share.
The offer values Cirrus at about $30 million, less than its current market capitalisation.
Cirrus has advised shareholders they should reject the proposal by taking no action, having earlier described it as offering a “derisory” premium to the company’s closing price on July 29 – the day before Webcentral submitted its proposal.
On August 17, Webcentral told the market of its intentions to remove Cirrus directors Andrew Milner, Daniel Rohr and Matthew Sullivan due to “disappointing FY21 results” that it claimed were illustrative of a disengaged management team and board.
However, it is not seeking to remove Paul Everingham, who has been a director of Cirrus since 2018.
ASX-listed Webcentral plans to replace the Cirrus directors with its own board members, managing director Joe Demase and company secretary Michael Wilton.
It hopes the resolutions will be passed at a requisition meeting of Cirrus shareholders on October 15.
Mr Everingham advised shareholders ahead of the meeting to vote against the resolutions, saying he would resign from the Cirrus board if the proposals were passed.
That could result in the company being without any independent governance until the board is refreshed and needing to appoint another director to comply with obligations under the Corporations Act, he said.
Mr Everingham reaffirmed the board’s unanimous recommendation that shareholders should reject Webcentral’s “opportunistic” takeover offer and explained that the resolutions were “not in the best interests of all shareholders (excluding Webcentral)”.
Webcentral is an 8.86 per cent shareholder in Cirrus, having purchased 82.3 million shares on the same day it submitted its takeover proposal.
Cirrus recently reported an 11.8 per cent increase in revenue to $106 million for the 2021 financial year, as well as net cash of $7.7 million and zero debt.
Its underlying earnings, however, were down from $3.7 million in FY20 to $2 million.
Mr Everingham said Cirrus had experienced a turbulent operating environment in FY21 due to global supply chain delays and a tight labour market, both of which were exacerbated by COVID-19.
He said despite the result, Cirrus was well positioned for the coming year, having achieved a number of milestones including a $13 million, three-year managed services contract from federal government agency Geoscience Australia in March – Cirrus’s largest contract to date.
“A positive outlook for FY22 is further underpinned by a comprehensive review of costs and organisational structure undertaken in the final quarter of FY21 against the backdrop of the pandemic, along with a significant order backlog and positive sales indicators across the company’s portfolio of services,” Mr Everingham said.
“In contrast to the board’s clear plan, the requisitioning shareholder [Webcentral] has not provided any details as to their own strategy to grow Cirrus, only that they intended to undertake a general review of the company's operations after the offer period and to expedite its intentions in respect of change of control under the offer.
“In conclusion, the Cirrus board is concerned the shareholder requisition puts the company’s strategy at significant risk, disrupting progress that has the potential to generate significant value for all shareholders.
“The Cirrus board remains fully committed to continue acting in the best interests of all shareholders and thanks them for their support.”
Cirrus’ shares have closed up 2.9 per cent to trade at 3.6 cents
