Australian internet service provider (ISP) 5G Networks has flagged a potential acquisition of Webcentral Group as it prepares to undertake a capital raising effort worth about $30 million.
The publicly-listed ISP, which is a licenced telecommunications carrier operating across Australia, told shareholders that plans to mount a new placement of 16.2 million new shares at $1.85 per share, equating to roughly $30 million.
The company said it would use the funds from raising for accessing unique growth opportunities during, and post, COVID-19, and potential acquisitions, with Webcentral Group being named as a potential target.
If the company were to acquire the troubled Webcentral Group, it would involve the refinancing of the target group’s outstanding debt, which is considerable.
As reported by ARN in late August, the publicly-listed Webcentral Group, formerly known as Arq Group, posted a significant loss for its half yearly results, dropping 1,217 per cent, as it faced a customer dispute and deep debt.
Total loss after tax from continuing operations from its singular small- to medium-sized business (SMB) division fell to roughly $18 million in the red, down from the previous corresponding period of $1.6 million in profit.
The drop, according to documents listed on the Australian Securities Exchange (ASX), was in part due to the selling off of its enterprise business — which retained the rights to the Arq Group brand — generating a loss on sale of approximately $1.6 million in the process.
Not included in the latest full-year financial reporting period for the company, however, was Webcentral’s proposed acquisition by the US-based Web.com for $12.2 million, with that deal to be put to a vote on 29 September.
This agreement would see Web.com refinance Webcentral’s existing debt facilities and repay all of its existing debt, which is priced at an approximate $45.6 million.
However, Webcentral’s financial report claimed that a condition of the acquisition was that the customer dispute had to go through settlement or final determination.
Without the offer from Web.com, Webcentral’s future looked bleak, the report claimed.
“There is no other clear path to repayment of the existing debt facilities, creating an uncertain future for the Group in the absence of the scheme,” the report noted.
However, with 5G Networks’ capital raise and potential acquisition on the table, Webcentral may now have another avenue out of debt and toward an alternative exit strategy.