Recent declarations by both parties that ASX-listed Quadtel was going to acquire national IT distributor CHA have proven to be premature. An announcement last week that the deal was not proceeding means CHA's woes in attempting to sell up will continue.
According to CHA managing director Roger Bushell, recent share price pressure on Quadtel's stock leads him to doubt whether the ASX-listed telco hardware distributor is any longer actually in a position to afford the deal.
Speaking to ARN, Bushell said Quadtel had originally agreed to settle the acquisition with a 20 per cent cash component and the remaining 80 per cent to be paid for with Quadtel stock in the merged entity. He was happy to proceed on such a basis but claimed Quadtel had "moved the goalposts" after "giving every indication it was going to go through with the deal. I got a conference call from two or three of the other directors who said they had revisited the financial aspects of the deal'," Bushell said of Quadtel's about face. "They then tried to renegotiate the deal with us by taking down the cash component of it which we are just not prepared to do.
"We are simply not interested in just taking equity in a stock that is copping a hammering at the moment. Quadtel's share price has halved and its ability to raise further cash is probably diminishing as well, so there is no way we were going to put all our eggs into a share basket where the price is so low."
Bushell said it would appear Quadtel is burning up its cash at a rate that is not leaving them too much to invest in acquisitions. He said the Australian market is not quite ready for broadband and suspects this is limiting Quadtel's ability to grow organically.
"It got to the stage where I had to ask them; Have you got any money at all?' and if so to prove it," Bushell said. "We [CHA and Quadtel] are still talking, but not in a manner that makes me very optimistic of a positive result."
Bushell refused to be soured by the whole episode, preferring to put it down to "you win some, you lose some".
Bushell later claimed 2000 had been an annus horribilis, despite good year-on-year revenue growth.
"After Y2K, GST, the Olympics and the exchange rate crises - and now this deal to be acquired falling over - it's been a bit difficult," he said.
"When I look at the figures it is hard to believe that we achieved 30 per cent [revenue] growth. It's been such a tough year. Every report about how slow it has been this year fits with my observations."