Divestment of IINet and 3 for 1 consolidation of Amcom shares (AMM, IIN)

Today Amcom announced that it had sold down 4.5M of its 35.5M shares in IINet, and will put forward a proposal to distribute the remaining holdings to AMM shareholders and consolidate AMM’s shares on a 3:1 basis.

 

With an average buy price of $1.14 starting in 2006, compared to today’s close of $2.85; Amcom have done pretty well out of their IInet shares.  However, given Amcom’s focus on enterprise-grade voice, data, and cloud, IInet’s consumer DSL business is not synergistic.

 

The distribution will be at a ratio of 1 IIN share for every 23.2 AMM shares, which is the equivalent of AMM spinning off 1/3 of the value of the combined entity by releasing the shares.  The 4.5M shares already sold should have raised nearly $13M, more than enough to cover Amcom’s $9m debt book.  So what will the new entity look without IIN? (Figures are based on extrapolating HY11 figures with no growth and include the 1 for 3 share consolidation)

Market cap: $178M

No Debt

Revenue: $82.8M

EBITDA: $27.6M (33.3%)

NPAT: $15.6M (18.8%)

Share price: 74c

Earnings per share: 6.4c

P/E: 11.5

 

I’m personally delighted that Amcom have decided to step away from this equity holding, and I plan to vote in favour of this initiative and offload my IIN shares at the first opportunity.

Speculation of Vocus bid for BigAir (BGL, VOC)

Recently the Australian Financial Review has printed rumours that wholesale telecoms operator Vocus Communications (VOC) is eyeing BigAir as a potential acquisition target.  Vocus have made data centre and fibre acquisitions recently, and Vocus’ wholesale business focus would make it an appropriate home for a company like BigAir, whose main channel to the market is wholesale.

 

While these are only rumours, BigAir’s CEO Jason Ashton has confirmed that “We’ve had chats with Vocus here and there but there’s been no formal dialogue or proposal” which sounds pretty good to me.  I certainly picked the right time to double my holdings, just a few days before the share price zoomed up to today’s close of 28c

 

As BGL’s market capitalisation rapidly approaches $50M, any takeover would be significantly larger than other Vocus acquisitions such as the $3.9M purchase of Digital River or the $6.3M acquisition of PerthIX.  Analysts have supported the move but suggested that a buyout would need to be funded by a mix of shares and cash.  I’m still uncertain about whether I’d take a cash/share offer or just sell my shares into the face of any deal (providing the share price roughly reflects the value of any Vocus offer).

 

Vocus have made smart acquisitions to support their wholesale strategy and they’re certainly no dummies for wanting to snap up BGL!

After trading around the 20c mark for the past year, BGL's share price has rocketed 50% in the past month