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
EBITDA: $27.6M (33.3%)
NPAT: $15.6M (18.8%)
Share price: 74c
Earnings per share: 6.4c
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.