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.