Declarations last week by both parties that listed Quadtel was going to acquire national IT distributor CHA have proven to be false as the latter's woes in attempting to sell up continued with an announcement this week that the deal was not proceeding.
According to CHA's 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" over the weekend 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. "They have 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 we are just not 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 agreed 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 get 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".
"Quadtel has many of the same investors as [fellow ASX-listed telco services company] Davnet," Bushell concluded. "They know how to play the game.
"No harm done. I've still got a nice business and I wasn't looking to get out of the industry just yet. I now just want to go off for Christmas and think about what to do next year. I just wish [Quadtel] had told us earlier."
Bushell later claimed 2000 had been an annus horibilis 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 - its 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.
"It has been bloody terrible this year right through but there has been a huge pickup in December."
Quadtel's 11th hour baulk on buying CHA this week, follows the failure of CHA's acquisition by the now-defunct global CHS Electronics in mid 1999. That doesn't mean Bushell or the suitors won't keep trying though.
"The business is always for sale," he said. "We don't have agents out actively looking for buyers but there is a steady stream of people who just ring and say they have an interested party.
"We have always got people interested in talking to us, but I am not going to sell the company for less than what I think it is worth. It is as simple as that.
I am only interested in a deal that allows CHA to thrive and grow in the manner that I would like it to."
* From the earlier story:
Earlier in a statement Bushell claimed "a series of meetings, conversations and communications to say that it was a done deal between CHA and Quadtel" had continued right up to this week.
"Then, and only then, were we informed that Quadtel is not in a position to commit to the acquisition," the statement said. "After 10 weeks of negotiations and due diligence on CHA, Quadtel didn't disclose it couldn't afford the deal until this week."
CHA's press statement also quoted Bushell on the recent lack of investor interest in Quadtel and suggested it could be the cause of the deal's failure.
"I guess you only have to watch the stock market to see that a huge chunk of its market capital has been eroded recently," he said. "It is a shame Quadtel couldn't complete [the sale]. Not least because of the substantial resources taken up in negotiating this kind of deal, but especially because the agreement did offer significant broadband synergy between the companies."
An obviously disappointed Bushell indicated CHA is still very keen to push into the broadband space and said it is something he hopes to "pursue vigorously" with its "existing vendors as well as new ones". He claimed it was always the strength, turnover, profitability and national infrastructure of CHA that was driving the deal in the first place.
"So it is back to business as usual at CHA today," he said.