Recommended Off-Market Takeover of Webcentral
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Recommended Off-Market Takeover of Webcentral ASX: 5GN September 2020
Transaction details
• 5G Networks Limited (“5GN”) has entered into a Bid Implementation Deed (BID) with ASX‐listed Webcentral Group Limited (“WCG” or
“Webcentral”) under which 5GN will offer to acquire 100% of the shares that it does not already own in WCG by way of a
recommended off market takeover bid (“Offer”).
• A bidder’s statement dated 18 September 2020 has been lodged with ASIC and served on WCG and ASX.
• The Webcentral directors unanimously recommend that WCG shareholders accept the Offer in the absence of a Superior Proposal.1
• Subject to the same qualification, the Webcentral directors, who collectively have a relevant interest in approximately 19% of the
Webcentral shares on issue, intend to accept, or procure the acceptance of, the Offer in respect of the WCG shares in which they
Transaction Details have a relevant interest.
• The consideration for 5GN’s Offer is 1 fully paid ordinary share in 5GN for every 12 WCG shares held by a WCG shareholder (with
fractional entitlements being rounded downwards).2
• 5GN currently has a 10.07% shareholding in WCG
• The consideration implies a price of 16.0 cents per Webcentral Share based on 1 month VWAP of 5GN’s share price up to and
including 16 September 2020 (“Implied Offer Price”)
• Upon achieving a 50.1% or greater shareholding in WCG, 5GN has committed to an approximately $47.5m debt facility to repay
WCG’s existing debt facilities.
• WCG will be able to unlock its operational potential once the debt burden has been replaced.
• 5GN owns and operates key infrastructure used by WCG which should provide process improvements and efficiencies leading to
A strategically improved operating cash flow
compelling
acquisition • The domains and hosting business is complementary to the 5GN offering, with significant opportunities to cross sell a number of
additional products and services
• 5GN has a track record in driving improved operational performance and improving EBITDA growth across its numerous acquisitions
1. As defined in the BID
2. 5GN will appoint a nominee to sell the shares that would otherwise be issued to shareholders who accept the Offer and who are foreign resident shareholders or
shareholders who would be issued with less than a marketable parcel of 5GN shares. The nominee will pay them the net proceeds of sale.Transaction details
• WCG provides digital solutions predominantly to small and medium businesses (SMB)
• The business predominantly consists of two key segments:
• Domains and hosting: Services include providing domain name registrations and renewals, website and email hosting, and
analysis, as well as Website development services
Overview of WCG • Digital marketing: Provides digital marketing solutions, such as search engine optimisation, search engine advertising, and
Web design services for small and medium businesses
• With its background in domain name and hosting, WCG predominantly assists SMBs with digital growth solutions including
assisting businesses get online, improve their online performance, and protect their online presence
• The company was formerly known as Melbourne IT Limited and ARQ Group Limited and changed its name to Webcentral Group
Limited in June 2020
• Implied Offer Price is compelling for WCG shareholders, while delivering appreciable value to 5GN. The Implied Offer Price
represents:
Transaction Metrics
• 13% premium to the 1 month VWAP closing price of Webcentral Shares up to and including 16 September 2020; and
• 45% premium to the 3 month VWAP closing price of Webcentral Shares up to and including 16 September 2020.
• 5GN believes that there are significant synergies and savings that can be delivered across both businesses:
• In a scenario where the businesses are combined, 5GN expects that it can generate synergies across both businesses of
Synergies over $7m per annum on a run rate basis;
• On a strategic shareholding basis where 5GN does not have 100%, 5GN expects that it can generate synergies across
both businesses of over $3m per annum on a run rate basis.
• The implied acquisition price is $19.5m based on the Implied Offer Price of 16.0 cents per Webcentral Share as at 16 September
2020.
Funding • The acquisition price will be an all scrip offer of approximately $9.8 – 19.5m (dependent on acceptances – minimum acceptance
condition of 50.1%);
• 5GN will provide a debt facility of approximately $47.5m to WCG.Transaction details
• In July 2020, Webcentral Group Limited (Webcentral) announced that it had entered into a scheme implementation deed (Scheme
Implementation Deed) with Web.com Group, Inc. (Web.com) under which Web.com proposed to acquire 100% of the share capital
of Webcentral, by way of a scheme of arrangement (Scheme). Web.com is wholly owned by an affiliate of Siris Capital Group, LLC,
a private equity firm based in New York.
• In September 2020 5GN gave Webcentral a non-binding indicative proposal to make a takeover bid offering 1 5GN Share for
every 12 Webcentral Shares subject to certain conditions (the principal terms of the Offer). The Webcentral Board subsequently
WCG’s Scheme
determined that the 5GN proposal was a “Superior Proposal” for the purposes of the Scheme Implementation deed for the
Implementation
Scheme (SID) and commenced the 5 business day matching right process in the SID. That process expired on Monday 14
Deed with Web.com
September 2020 and Web.com did not provide a Matching or Superior Proposal (as defined in clause 10.5(b) of the SID) during
that period.
• On 17 September 2020, Webcentral received a further proposal from Web.com to increase the consideration payable under the
Web.com Proposal to $0.18 per Webcentral Share. On 17 September 2020, Webcentral announced that it had determined that this
would not provide an equivalent or superior outcome for Webcentral Shareholders as a whole compared with the Offer, and has
terminated the SID with Web.com.
• If 5GN acquires a relevant interest in 90% or more of Webcentral Shares, 5GN intends to:
• proceed with the compulsory acquisition of the outstanding Webcentral Shares in accordance with the provisions of Part
6A.1 of the Corporations Act;
Intentions for
• thereupon arrange for Webcentral to be removed from the official list of the ASX;
acquisition of greater
than 90% • replace the members of the Webcentral Board with the nominees of 5GN. Replacement board members have not yet been
identified by 5GN and their identity will depend on the circumstances at the relevant time; and
• 5GN intends to propose that a broad based review of Webcentral’s operations be conducted on both a strategic and
financial level.
• 5GN may acquire an interest which is below 90%, and views this as a satisfactory outcome for 5GN
• Under a scenario where 5GN controls less than 90% of WCG, it expects to be able to extract a significant portion of the synergies.
Intentions for If 5GN acquires a relevant interest in 50.1% or more of Webcentral Shares, 5GN intends to:
acquisition of less • seek to replace some of the members of the Webcentral Board with nominees of 5GN; and
than 90% • consider whether it is appropriate to maintain Webcentral’s listing on ASX.
• 5GN reserves the right to declare the Offer free of the 50.1% minimum acceptance condition and hold a substantial minority
positionTransaction details
• 5GN reconfirms its FY21 revenue and EBITDA guidance in the range of $60 – 65m and $8 – 8.5m (before material acquisitions)
5GN Trading Update respectively
• Operating cashflow conversion expected to remain strong in FY21 and FY22Strategic Rationale and Profile of the Combined
Business
6A strategically compelling acquisition
WCG complements and integrates into our operating model and enhances our business, adding a leading domains
and registry business and a significant annuity revenue stream
Transformational transaction for 5GN materially changing the
Opportunity to gain exposure to new markets and access to a
scale, earnings profile of the business, and increasing
large base of new customers
addressable markets through new product offerings
Increased diversification and resilience of 5GN’s earnings
Accretive transaction expected to deliver long-term value for
profile through the introduction of complimentary product
shareholders immediately and increasing through realisation
offerings, encouraging customer stickiness and increasing
of operational and product synergies
customer lifetime value
Strong strategic fit aligning with 5GN’s growth strategy to Combined business would create a diverse enterprise with a
acquire businesses with operational and product synergies significant combined customer base and deep management
augmenting current capabilities expertiseAcquisition of WCG expected to deliver approximately
$3 – 7m in annual cost synergies
Acquisition is expected to generate material cost based synergies and savings from streamlining combined
operations
Centralised Opportunities for improved support function utilisation, operational efficiency and profitability through
function leveraging corporate services, sales and client capability across the combined group
Target annual
operational
synergies:
100% basis: Opportunities exists to increase utilisation of 5G Network’s available Infrastructure, increasing overall
Infrastructure
>$7m p.a. efficiency of the combined business
$3m p.a.
Platform Operating efficiency opportunities from strategic review of overlapping platform technologies across
technologies combined business
The combined businesses will complete a detailed assessment of the optimal technology solution with
Technology
any changes to technology based on enhancing the overall client experience with minimal disruptions,
synergies
with synergies to be realised over the medium term
Not included in
above target
synergies
Revenue growth opportunities from cross-selling extended capability to the combined group’s client
Revenue
base
synergies
Expanded scale and capabilities of combined group expected to attract increased inbound interestOverview of Webcentral Group
The Webcentral Group is an Australian full-service digital services partner for small and medium businesses in the
various stages of their online journey, from inception to acceleration
Since its incorporation in 1996, Webcentral (previously called Melbourne IT Limited and Arq Group Limited) has helped
the digital success of more than one million Australian and New Zealand small to medium businesses
With roots in domain name and hosting, Webcentral are the small and medium business digital growth solution experts
helping businesses get online, improve their online performance, and protect their online presence
Launched the domain name Established in 1997 Established in 2008 Established in 1997
industry in Australia in 1996
Provides various digital Leading Australian digital New Zealand’s most
Helps SMBs establish and solutions to SMBs including marketing agency experienced accredited
build their social and digital domain names, web hosting, domain name registrar
Specialises in search engine
profile online website design, online
optimisation, search Offers complete service
marketing and developing a
Other services include domain marketing, social marketing, offering including domain
suite of email and office
names, website hosting, pay-per-click advertising and names, web hosting, email,
applications
website design, online digital reputation websites, social media
marketing and website Has a market presence in management advertising and online
security Australia with its service marketing
Products targeted at SMBs
offering targeting SMBsTransaction Details
11Transaction funding
Funding details
• The consideration for the Recommended Off-Market Takeover Offer is
1 fully paid ordinary share in 5GN (5GN Shares) for every 12 Webcentral
Shares (“Exchange Ratio”).
Sources and uses
• The consideration implies a price of 16.0 cents per Webcentral Share
based on 1 month VWAP of 5GN’s share price up to and including 16 Sources (A$m) 50.1% Acq. 100% Acq.
Purchase price September 2020 (“Implied Offer Price”) 5GN shares issued as scrip 9.8 19.5
• The Implied Offer Price represents: Cash and unused debt facility 47.5 47.5
• 13% premium to the 1 month VWAP closing price of Webcentral Total 57.3 67.0
Shares on 16 September 2020; and
• 45% premium to the 3 month VWAP closing price of Webcentral Uses (A$m)
Shares on 16 September 2020.
Webcentral scrip consideration 9.8 19.5
Refinance Webcentral existing debt 47.5 47.5
Total 57.3 67.0
• 5GN has committed, upon achieving a 50.1% or greater shareholding
Loan to
WCG, to extend an approximately $47.5m debt facility to be used to
Webcentral
repay WCG’s existing debt facilitiesTransaction terms
• 5G Networks Limited (“5GN”) has entered into a Bid Implementation Deed (BID) with ASX‐listed Webcentral Group Limited
(“WCG” or “Webcentral”) under which 5GN will offer to acquire 100% of the shares that it does not already own in WCG by
way of a recommended off market takeover bid (“Offer”)
• The consideration is 1 fully paid ordinary share in 5GN (5GN Shares) for every 12 Webcentral Shares (“Exchange Ratio”). The
Offer terms
consideration implies a price of 16.0 cents per Webcentral Share based on 1 month VWAP of 5GN’s share price up to and
including 16 September 2020 (“Implied Offer Price”)
• The Offer is subject to limited defeating conditions, including a 50.1% minimum acceptance condition (on a fully diluted basis),
no material adverse change and certain other conditions
• Unless withdrawn, the Offer will remain open for acceptance during the period commencing on the date of this Offer and
ending on the Closing Date being 7.00 pm (Sydney time) on the later of:
• Tuesday 20 October 2020; and
• any date to which the Offer Period is extended.
• 5GN reserves the right, exercisable in its sole discretion, to extend the period of the Offer in accordance with the Corporations
Offer period Act
• If, within the last 7 days of the Offer Period, either of the following events occurs:
• the Offer is varied to improve the consideration offered; or
• 5GN’s voting power in Webcentral increases to more than 50%,
• then the Offer Period will be automatically extended so that it ends 14 days after the relevant event.
• If the Offer becomes or is declared unconditional, Webcentral shareholders who accept the Offer will be given 5GN shares in
exchange for WCG shares on or before the earlier of:
Settlement • the day one month after the Offer is accepted or, if the Offer is subject to a Condition when accepted, within one
month after the Offer becomes or is declared unconditional; and
• 21 days after the end of the period of the Offer.Transaction details
• In July 2020, Webcentral Group Limited (Webcentral) announced that it had entered into a scheme implementation deed (Scheme
Implementation Deed) with Web.com Group, Inc. (Web.com) under which Web.com proposed to acquire 100% of the share capital of
Webcentral, by way of a scheme of arrangement (Scheme). Web.com is wholly owned by an affiliate of Siris Capital Group, LLC, a private
equity firm based in New York.
• In September 2020 5GN gave Webcentral a non-binding indicative proposal to make a takeover bid offering 1 5GN Share for every 12
WCG’s Scheme Webcentral Shares subject to certain conditions (the principal terms of the Offer). The Webcentral Board subsequently determined that
Implementation the 5GN proposal was a “Superior Proposal” for the purposes of the Scheme Implementation deed for the Scheme (SID) and commenced
Deed with Web.com the 5 business day matching right process in the SID. That process expired on Monday 14 September 2020 and Web.com did not provide
a Matching or Superior Proposal (as defined in clause 10.5(b) of the SID) during that period.
• On 17 September 2020, Webcentral received a further proposal from Web.com to increase the consideration payable under the Web.com
Proposal to $0.18 per Webcentral Share. On 17 September 2020, Webcentral announced that it had determined that this would not
provide an equivalent or superior outcome for Webcentral Shareholders as a whole compared with the Offer, and has terminated the SID
with Web.com.
• If 5GN acquires a relevant interest in 90% or more of Webcentral Shares, 5GN intends to:
• proceed with the compulsory acquisition of the outstanding Webcentral Shares in accordance with the provisions of Part 6A.1 of
the Corporations Act;
Intentions for
• thereupon arrange for Webcentral to be removed from the official list of the ASX;
acquisition of greater
than 90% • replace the members of the Webcentral Board with the nominees of 5GN. Replacement board members have not yet been
identified by 5GN and their identity will depend on the circumstances at the relevant time; and
• 5GN intends to propose that a broad based review of Webcentral’s operations be conducted on both a strategic and financial
level.
• 5GN may acquire an interest which is below 90%, and views this as a satisfactory outcome for 5GN
• Under a scenario where 5GN controls less than 90% of WCG, it expects to be able to extract a significant portion of the synergies. If 5GN
acquires a relevant interest in 50.1% or more of Webcentral Shares, 5GN intends to:
Intentions for
acquisition of less • seek to replace some of the members of the Webcentral Board with nominees of 5GN; and
than 90% • consider whether it is appropriate to maintain Webcentral’s listing on ASX.
• 5GN reserves the right to declare the Offer free of the 50.1% minimum acceptance condition
and hold a substantial minority positionAppendix
15Disclaimer and important notice Important Notice This presentation (Presentation) has been prepared by 5G Networks Limited (ACN 163 312 025) (5GN) and includes information regarding the Offer by 5GN to acquire all the shares on issue in WCG that it does not already own by way of an off market scrip takeover bid.. Summary information The information contained in this Presentation is of a general nature and no representation or warranty, express or implied, is provided in relation to the accuracy or completeness of the information except as required by law. Any decision by you in relation to the Offer should be based on the bidder’s statement in respect of the Offer lodged by 5GN with ASIC and served on WCG and ASX. You should read that bidder’s statement and any target’s statement in their entirety before deciding whether or not to accept the Offer. If you have any doubt, please consult your financial, legal or other adviser. Wilsons Corporate Finance Limited (ABN 65 057 547 323) as financial adviser to the Offer, together with its affiliates, related bodies corporate (as that term is defined in the Corporations Act 2001 (Cth) (Corporations Act)) and shareholders, and their respective directors, employees, officers, affiliates, representatives, agents, partners, consultants and advisers (together the Limited Parties) have not authorised, permitted or caused the issue, lodgement, submission, dispatch or provision of this Presentation and, except for any express references to their name in this Presentation, do not make or purport to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by a Limited Party. Statements in this Presentation are made only as of the date of this Presentation unless otherwise stated and the information in this Presentation remains subject to change without notice. 5GN is under no obligation to update this Presentation. The historical information in this Presentation is, or is based upon, information that has been released to the market. It should be read in conjunction with 5GN’s other periodic and continuous disclosure announcements to ASX and the bidder’s statement relating to the Offer available at www.asx.com.au. Not an offer This Presentation is not a bidder’s statement, scheme booklet, prospectus, disclosure document, product disclosure statement or other offering document under Australian law or under any other law. It is for information purposes only and is not an invitation nor offer of securities for subscription, purchase or sale in any jurisdiction. This Presentation does not constitute financial product advice and does not and will not form any part of any contract for the acquisition of 5GN shares under the Offer. This Presentation does not purport to contain all the information that a prospective investor may require in evaluating a possible investment in 5GN by accepting the Offer nor does it contain all the information which would be required in a prospectus, scheme booklet or bidder’s statement prepared in accordance with the requirements of the Corporations Act. U.S. restrictions This document may not be released or distributed in the United States. This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or any other jurisdiction in which such an offer would be illegal. The 5GN shares which may be issued under the Offer have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (Securities Act) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the 5GN shares may not be offered or sold, directly or indirectly, to persons in the United States except in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and the applicable securities laws of any state or other jurisdiction of the United States. Limited Parties The Limited Parties may, from time to time, hold interests in the securities of, or earn brokerage, fees or other benefits from 5GN. Not investment advice This Presentation has been prepared without taking account of any person’s investment objectives, financial situation, tax considerations or particular needs and prospective investors should conduct their own independent investigation and assessment of the Offer and the information contained in, or referred to in, this Presentation. An investment in 5GN is subject to investment risk including possible loss of income and principal invested. Please see the ‘Risk Factors’ Section of the bidder’s statement for further details.
Disclaimer and important notice Financial amounts All dollar values are in Australian dollars (A$) and financial data is presented as at, or for the period ended, 31 December 2019 unless stated otherwise. 5GN’s results are reported under Australian International Financial Reporting Standards, or AIFRS. The historical information included in this Presentation is based on information that has previously been released to the market. The pro forma historical financial information does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission. Investors should also be aware that certain financial data included in this Presentation may be ‘non-IFRS financial information’ under Regulatory Guide 230 Disclosing non-IFRS financial information published by the Australian Securities and Investments Commission or ‘non-GAAP financial measures’ under Regulation G of the US Securities Exchange Act of 1934. The non-IFRS financial information and these non-GAAP financial measures do not have a standardised meaning prescribed by AIFRS and, therefore, may not be comparable to similarly titled measures presented by other entities, nor should they be construed as an alternative to other financial measures determined in accordance with AIFRS. Investors are cautioned, therefore, not to place undue reliance on any non-IFRS financial measures included in this Presentation. Future performance This Presentation contains certain ‘forward looking statements’. Forward looking statements can generally be identified by the use of forward looking words such as ‘anticipate’, ‘believe’, ‘expect’, ‘project’, ‘forecast’, ‘estimate’, ‘likely’, ‘intend’, ‘should’, ‘will’, ‘could’, ‘may’, ‘target’, ‘plan’ and other similar expressions within the meaning of securities laws of applicable jurisdictions, and include statements regarding outcome and effects of the Offer. Indications of, and guidance or outlook on future earnings, distributions or financial position or performance are also forward looking statements. The forward looking statements contained in this Presentation involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of 5GN and the Limited Parties, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. Refer to the “Risk Factors” section of the bidder’s statement for a summary of certain risk factors that may affect 5GN or its shares. None of the Limited Parties has authorised, approved or verified any forward-looking statements. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. Disclaimer No party other than 5GN has authorised or caused the issue, lodgement, submission, dispatch or provision of this Presentation, or takes any responsibility for, or makes or purports to make any statements, representations or undertakings in this Presentation. No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Presentation or the bidder’ statement. Any information or representation not contained in this Presentation may not be relied upon as having been authorised by 5GN in connection with the Offer. To the maximum extent permitted by law, 5GN and its related bodies corporate and their respective officers, directors, employees, agents or advisers, and the Limited Parties, expressly disclaim any and all liability, including, without limitation, any liability arising out of fault or negligence on the part of any person, for any any direct, indirect, consequential or contingent loss, damage, expenses or costs arising out of or incurred by you as a result of your acceptance of the Offer or arising from the use of the information in this Presentation or otherwise arising in connection with this Presentation or the Offer. Except as mat be required by law, no representation or warranty, express or implied, is made by 5GN or its related bodies corporate or any of their respective officers, directors, employees, agents or advisers, nor any Limited Party as to the currency, accuracy, reliability, completeness or fairness of the information, opinions and conclusions contained in this Presentation. In particular, the Limited Parties have not independently verified such information and take no responsibility for any part of this Presentation or the Offer. The Limited Parties make no recommendation as to whether you or your related parties should accept the Offer nor do they make any representations or warranties, express or implied, to you concerning the Offer or any such information, and you represent, warrant and agree that you have not relied on any statements made by the Limited Parties in relation to 5GN shares or the Offer generally and you further expressly disclaim that you are in a fiduciary relationship with any of them. The information in this Presentation remains subject to change without notice. 5GN reserves the right to withdraw or vary the timetable for the Offer contained in the bidder’s statement without notice. Acceptance By attending an investor presentation or briefing, or accepting, assessing or reviewing this document you acknowledge and agree to the above.
You can also read
