Perth based Amcom Telecommunications has cleared a major overhang from its share register after Futuris Corporation agreed to sell its 50 per cent stake to a range of institutional investors.
Perth based Amcom Telecommunications has cleared a major overhang from its share register after Futuris Corporation agreed to sell its 50 per cent stake to a range of institutional investors.
Futuris said it will use $48.5 million from the sale of its 50 per cent stake in Amcom to reduce debt.
The transaction comprises a selldown by Futuris of 170 million shares to institutional investors and a buyback and cancellation by Amcom of the remaining 99.2 million shares beneficially held by Futuris for an average price of 18 cents each.
The institutional selldown was successfully completed early today at 17 cents per share.
"Proceeds will be applied to debt reduction, and the divestment will have a total net debt reduction benefit to Futuris of approximately $64 million, with the sale proceeds being supplemented by the deconsolidation of net debt attributable to Amcom," Futuris said.
The institutional selldown reduced Futuris's stake in Amcom to 18.6 per cent.
Amcom will buy back and cancel the remaining shares for $19.6 million, subject to shareholder approval, excluding Futuris.
Futuris said the transaction as proposed represents sale at book value.
Under the terms of the buyback agreement between Amcom and Futuris, payment of $7.0 million of the $19.6 million of the buyback consideration will be deferred until January 31, 2009.
Futuris decided to sell its Amcom stake after the federal government cancelled funding for the OPEL rural and regional broadband network, which Futuris said made the pursuit of its telecommunications strategy untenable.
"Accordingly, we are realising our capital and reapplying it to our strategy of debt reduction and in reinvestment in our core performing rural and regional assets," Futuris chief executive Les Wozniczka said.
Amcom chairman Tony Grist said the transaction was an "excellent outcome" for Amcom shareholders, which would be earnings per share (EPS) accretive on a pro forma basis.
Amcom said the transaction had also introduced several new strategic investors to Amcom.
"We now have greater flexibility to pursue future EPS accretive transactions," Mr Grist said.
Futuris shares were down half a cent at $1.375 at 1301 AEST today. Amcom was steady at 19.5 cents.
Below is AMCOM's full announcement.
EXIT OF FUTURIS AS CONTROLLING SHAREHOLDER - SELECTIVE BUYBACK OF ITS RESIDUAL HOLDING
Amcom has reached agreement with its major shareholder Futuris Corporation Limited ("Futuris") on the terms of a transaction through which Futuris will exit from its investment in Amcom.
The transaction comprises a selldown by Futuris of 170 million shares to institutional investors and management, and a selective buyback and cancellation by Amcom of the remaining 99.2 million shares beneficially held by Futuris for an average price of 18 cents per share, equating to a total value of approximately $48.5 million.
The institutional selldown was successfully completed this morning at 17 cents per share.
Amcom has agreed to buy back and cancel the remaining 99.2 million shares beneficially held by Futuris for $19.6 million or 19.7 cents per share, subject only to shareholder The transaction comprises a selldown by Futuris of 170 million shares to institutional investors and management, and a selective buyback and cancellation by Amcom of the remaining 99.2 million shares beneficially held by Futuris for an average price of 18 cents per share, equating to a total value of approximately $48.5 million.
The institutional selldown was successfully completed this morning at 17 cents per share.
Amcom has agreed to buy back and cancel the remaining 99.2 million shares beneficially held by Futuris for $19.6 million or 19.7 cents per share, subject only to shareholder approval (excluding votes cast by Futuris and shareholders associated with Futuris). Amcom will fund the buyback by an increase in its existing debt facilities. Under the terms of the buyback agreement between Amcom and Futuris, payment of $7.0 million of the $19.6 million of the buyback consideration will be deferred until 31 January 2009.
Tony Grist, Chairman of Amcom welcomed Futuris' contribution to Amcom, saying "Amcom's relationship with Futuris, and in particular, the services of Mr Wozniczka, have been extremely valuable over the last five years, supporting our growth from revenues of $20 million in FY04 to $44 million in FY08. However, with Futuris now wishing to re-focus on its core activities, this transaction removes uncertainty around the ownership of Amcom.
The transaction is an excellent outcome for Amcom shareholders. Amcom is buying back its shares at an EV/EBIT multiple of 5.2x1 which is below the median trading multiple of our peer group of companies. Further, the buyback is EPS accretive on a pro forma basis and the transaction has introduced several new strategic investors to Amcom. We now have greater flexibility to pursue future EPS accretive transactions."
The independent Amcom directors unanimously support the transaction and recommend that shareholders vote in favour of the proposed buyback, subject to no material adverse change occurring. Each director has stated their intention to vote their shareholding in favour of the buyback resolutions. Collectively, shares controlled by the directors represent 4.2% of total Amcom shares currently on issue.
Amcom has also received notice from one of its larger shareholders, Wyllie Group Pty Ltd, who holds 54.4 million shares or approximately 10% of total Amcom shares, stating that it is supportive of the selective share buyback and intends to vote in favour of the proposed buyback in the absence of a material change in Amcom or market conditions.
Amcom has engaged an independent expert to assess the selective buyback in accordance with the requirements of the Corporations Act and ASX Listing Rules. The expert has concluded that the transaction is fair and reasonable to Amcom shareholders other than Futuris.
An executive summary of the independent expert's report is attached. The full independent expert's report will be included in the notice of meeting seeking approval to the selective share buyback, which is to be sent to shareholders in the coming weeks.
Following completion of the proposed buyback, Les Wozniczka will resign from the board. The Amcom directors intend to appoint a suitably qualified director to replace Mr Wozniczka in due course.
Clive Stein, Managing Director of Amcom re-iterated his thanks for Futuris support and added, "This transaction enables us to drive the business forward with confidence. Perth and Adelaide are in excellent shape as highlighted in our recent FY08 results. We are now positioning the business for geographic expansion on the east coast and already have access to fibre in Melbourne, Sydney and Brisbane. We are on track to deliver a minimum of 25% EBIT growth in FY09."
Futuris has the right to terminate the proposed selective buyback in certain circumstances, including where a superior proposal (compared to the proposed buyback) emerges to acquire all of Amcom. The parties have agreed to customary deal protection arrangements (including reciprocal break fees) as part of the proposed transaction.
Further information about the proposed buyback will be sent to shareholders in the coming weeks. The shareholder meeting to consider the buyback is expected to be convened for mid-late October.
The selldown has been managed by Euroz Securities Limited and Albion Capital Partners, a firm associated with the Chairman. Amcom is being advised on the transaction by Grant Samuel Corporate Finance.
