Webcentral sets stage for potential acquisition bidding war

Webcentral Group has received a takeover proposal from Australian internet service provider (ISP) 5G Networks and has given previous contender Web.com a chance to match or beat the proposal.

The 5G Networks proposal is valued at one 5G Networks share for every 12 Webcentral shares, with a minimum of 50.1 per cent of shares acquired in the process, according to a statement to the Australian Securities Exchange (ASX).

The ISP's proposal is based on the implied price of 17.7 cents per Webcentral share with an implied equity value for the business of $21.6 million.

As part of the agreement, 5G Networks would also pay off all Webcentral's existing debt, which is currently over $40 million.

If both businesses are combined, the ISP expects to generate $7 million per annum on a run rate basis. If not, then $3 million is expected.

However, the new proposal with 5G Networks is not set in stone, as Webcentral has opened up the opportunity for Web.com to match or surpass the proposal.

It referred to 5G Network's offer as a "superior proposal" compared to Web.com's offer, which saw the US-based company propose in July to acquire all of its shares at $0.10 per Webcentral share at a total price of $12.2 million.

The opening for the counter proposal has a time limit on it however, with Web.com given five business days to respond.

5G Networks currently also has 10.1 per cent of the shares in Webcentral and has confirmed it will not be voting in favour of the Web.com proposal.

The acquisition deal from 5G Networks would be sourced from its recent funding raise of $30 million, as reported previously by ARN.

In its recent financial report for its half year, the beleaguered Webcentral was hit by the cost of selling off its enterprise business and a customer dispute, previously presented Web.com’s potential acquisition as the only way the company could pay off its debt.

The Web.com deal, the financial report noted, was reliant on Webcentral wrapping up the complaint and a cross-complaint from the customer, which cost it a reversal of $9 million.

Also in the report was Webcentral, previously known as Arq Group, posting a significant loss for its half yearly results, dropping 1,217 per cent.

This saw its total loss after tax from continuing operations from its singular small- to medium-sized business (SMB) division fall to roughly $18 million in the red, down from the previous corresponding period of $1.6 million in profit.