Publicly-listed digital services provider Webcentral Group has struck an acquisition bid agreement with 5G Networks, terminating its previous acquisition agreement with US domain name registry Web.com.
The move sees Webcentral Group, previously known as Arq Group, turn down a renewed acquisition bid by Web.com worth $0.18 per share, an increase on its prior offer of $0.155 per share, which would have placed the value of an acquisition of Webcentral at around $18.9 million.
“The Webcentral Board has determined that neither the Web.com counter proposal nor the revised Web.com Proposal (with the revised consideration of $0.18 per Webcentral share) would provide an equivalent or superior outcome for Webcentral shareholders as a whole compared with the 5GN Proposal,” Webcentral told shareholders.
“The Webcentral board has determined that the 5GN proposal is a superior proposal to the Web.com counter proposal and the revised Web.com proposal, notwithstanding the increased headline cash offer of $0.18 by Web.com,” the company said.
The decision comes after a relatively brief bidding war for Webcentral Group by Web.com and 5G Networks.
It was revealed in July that Web.com Group had struck a deal to acquire the beleaguered Arq Group for around $12.2 million.
In early September, 5G Networks, a locally-listed internet service provider, flagged a potential acquisition of Webcentral Group as it prepared to undertake a capital raising effort worth about $30 million.
Just days later, 5G Networks launched its own takeover proposal of Webcentral Group. The ISP's proposal, which was valued at one 5G Networks share for every 12 Webcentral shares, came with an implied equity value for the business of $21.6 million.
It didn’t take long for Web.com Group to increase its offer for the company formerly known as Arq Group, raising its bid to $18.9 million.
Now, despite a revised offer from Web.com of $0.18 per share, Webcentral Group has determined that the offer from 5G Networks represents the best value for shareholders.
“The 5G offer provides Webcentral shareholders with potential to participate in the significant turnaround opportunity presented by 5GN, where 5GN is proposing to use its expertise and asset base to add significant value,” Webcentral Group chair Andrew Reitzer said.
“The combined group will offer a more appropriate leverage position and funding flexibility to support organic growth and possible future acquisition opportunities than what is presently available to Webcentral.”
5G Networks told its shareholders on 17 September that it had entered into a bid implementation deed with Webcentral Group under which it will offer to acquire 100 per cent of the target’s shares on issue that it does not already own via a recommended off-market takeover bid.
“The Webcentral directors unanimously recommend that WCG [Webcentral Group] shareholders accept the offer in the absence of a superior proposal,” 5G Networks said in a statement.
5G Networks (5GN) pointed out that the deal means the Webcentral Group (WCG) brand will remain in Australian hands, while managing director Joe Demanse noted that the acquisition would complement his company’s existing infrastructure utilising its available capacity and increase earnings across the group.
"Additionally, the recurring revenue models of both organisations underpins stable and therefore very predictable revenue streams. We are excited by the growth potential we see in WCG and will leverage our experience and expertise to add significant value,” he said.
“The domain and hosting business are complementary to the 5GN product range, which unlocks significant opportunities to collaborate, package and integrate our solutions to improve the service experience for customers and drive product profitability.
“Accordingly, this acquisition delivers a compelling opportunity to leverage both 5GN’s digital infrastructure and core operational capabilities to drive profitability across both 5GN and WCG,” he added.
Upon terminating its prior agreement with Web.com, Webcentral Group said it had paid a $500,000 reimbursement fee to Web.com.