Aussie Broadband lobs $467m takeover offer for Superloop

Update: Since this story was published, the board of Superloop (ASX: SLC) has knocked back the offer, describing it as "opportunistic" and fundamentally devaluing the company. Click here for more.

Challenger telco and internet service provider Aussie Broadband (ASX: ABB) has launched a $466.7 million takeover bid for rival Superloop, just months after sparring with the Brisbane-based competitor to take control of communications software group Symbio (ASX: SYM).

After its Symbio acquisition was approved by a Federal Court this month, Aussie Broadband shows no sign of slowing down its expansive strategy by lobbing a scrip-based offer at Superloop and its infrastructure-on-demand platform that has seen rapid growth to now service more than 408,000 customers.

Gippsland-based Aussie Broadband's non-binding, indicative offer of $0.95 per share represents an 8.6 per cent premium to Superloop's last trading price of $0.875, although Aussie Broadband emphasises it is a 33.2 per cent premium to the three-month weighted average price. 

The suitor has also acquired a 19.9 per cent interest in Superloop at $0.95.

The offer is still short of the Queensland Investment Corporation's (QIC) $494 million bid for Superloop in 2019 which eventually collapsed. In that financial year, Superloop ran at a statutory loss of $72 million, in contrast to the recent turnaround of its bottom line with a positive net profit after tax and amortisation (NPATA) of $1.2 million for the December half.

The indicative value of the offer is supported by recent buoyancy in the ABB share price which is sitting close to 52-week highs of $4.53.

If the offer progresses, Superloop investors would receive 0.21 ABB shares for ever SLC share held, and the acquirer's subscriber numbers would be lifted to more than one million, along with greater reach and network infrastructure supported by three brands - Superloop, Aussie Broadband and Exetel, the latter having been bought by Superloop in mid-2021.

At the time of publication, Superloop is yet to respond to the offer. 

Superloop was founded in 2014 by Bevan Slattery, who also co-founded PIPE Networks which was sold to TPG Telecom in 2010 for $373 million, as well as Megaport (ASX: MP1), NextDC (ASX: NXT), Soda, SUBCO and Biopixel.

By virtue of its 2017 acquisition of SubPartners, Superloop is a key player in the INDIGO submarine cable cable consortium that includes Telstra (ASX: TLS), Singtel and Google among others, and involved the construction of two undersea cables of a total length of 13,800km connecting Sydney with Singapore via Perth and Jakarta.

In mid-2021, Superloop sold select assets in Singapore as well as its Hong Kong business for $140 million.

Last week the company released its December-half results with total revenue up 32.7 per cent to $197.6 million, and a 38.1 per cent rise in customer growth as more than 40,000 new customers signed up for Superloop plans over the six months.

"We are very pleased to report another period of strong financial performance, delivering record organic revenue and net new customer growth over the period. Importantly, all three segments contributed to this growth," CEO Paul Tyler said at the time.

"The 2024 financial year is the first of our three-year ‘Double Down’ strategy and the performance in this first half demonstrates its execution is tracking strongly against plan.

"We were also very pleased this half to secure an exclusive five-year wholesale contract with AGL. This win reaffirms our strong wholesale capabilities coupled with our low-cost operating model and will support significant growth in the Wholesale segment's revenue and gross margin from FY25."

The company revealed that 9,000 new customers were added in January alone as the current half-year has started strongly. Superloop itself also maintains an "active but disciplined approach" to exploring merger and acquisition opportunities.

Superloop's board believes the company is on track to delivering underlying earnings of $49-53 million for FY24, which would represent a jump of 31-42 per cent.

Today's announcement comes amidst ongoing consolidation in Australia's telecommunications sector, with some of the most significant deals in recent years including the TPG Telecom (ASX: TPM) merger with Vodafone Hutchison Australia in mid-2020, Macqurie's $3.5 billion buyout of Vocus in 2021, and a $3.62 billion takeover of South Australian challenger telco Uniti in 2022 from a consortium comprising Brookfield and HRL Morrison & Co.

Late last year an attempt from Macquarie-backed Vocus to buy the non-mobile fibre assets of TPG for $6.3 billion fell through after the parties failed to agree to commercial terms.

On a much smaller scale, earlier this month Melbourne-based telco and managed IT services group Spirit Technology Solutions (ASX: ST1) acquired founder-led cyber security technology company InfoTrust for $34.6 million.