Telecommunications provider, Freshtel (ASX:FRE), is set to merge with fellow telco and cloud services player, Field Solutions Group (FSG), in a deal that is understood to be worth millions.
Freshtel, which is publicly-listed on the Australian Securities Exchange (ASX), told shareholders that it had entered into a binding heads of agreement to acquire 100 per cent of the Sydney-based telecommunications and cloud services company.
The acquisition agreement will see Freshtel Holdings change its name to Field Solutions Holdings Limited upon completion.
FSG, which was founded in 2012, provides private cloud hosting services and generic cloud hosting services, drawing upon its own nationwide IP network. These services include infrastructure-as-a-service, private data networks, and Voice over Internet Protocol services.
It predominantly services customers in regional Australian areas.
Freshtel said that the proposed acquisition of FSG will constitute a change in the nature and scale of its activities. No longer will it provide just telecommunications services; following the completion of the acquisition, it will be a telecoms and technology services provide.
Such as transition will require approval from the company’s shareholders at a general meeting.
According to Freshtel, the cloud services company intends to expand its regional network and provide cloud-based software and services to small and medium-sized enterprises, and mid-sized government clients.
In the past three years, FSG have seen 68 per cent year-on-year growth. It claims revenues of over $5 million and earnings before tax (EBIT) of around $1.25 million.
FSG plans to grow its business further in regional Australia, with expansions of its networks and by offering new services to its clients.
Under the terms of the deal, Freshtel will acquire 100 per cent of FSG’s shares, and will subsequently issue 125 million of its fully paid ordinary shares to the target company once the acquisition has been settled.
However, Freshtel said it would complete a capital raising effort of at least $3 million through the issue of 60 million shares or more to help finance the deal.
The closure of the acquisition agreement, which is expected to settle on 6 March next year, will also see a top-tier executive shuffle within Freshtel’s ranks.
At the time of writing, Freshtel’s shares stood at $0.002.