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Adelaide-based telco Uniti Group (ASX: UWL) (fka 'Uniti Wireless') is poised to acquire Australia's leading 'phonewords' provider for $78 million following a substantial capital raise.
Uniti will acquire 100 per cent of 1300 Australia and its related entities for $78 million, funded by an $85 million entitlement raise.
1300 Australia is the market leader in phonewords nationally, holding the largest inventory of phonewords, with approximately 4,500 phonewords and priority numbers ('1300', '1800', and '13') currently licenced to businesses.
Phonewords are a popular marketing tool that allow businesses to spell a phone number using words. These are typically '1300', '1800', or '13' numbers.
For example, Energy Australia's phonewords number is "1300 ENERGY", while Cash Converters' is "13 CASH".
Over 30,000 Australian businesses use phonewords in their advertising efforts.
1300 Australia is Telstra's official phoneword partner and was formerly majority owned by Telstra. The group has other distribution relationships, largely in their infancy, with Optus, Vita Group, and Vodafone.
The business has a range of customers, from small to large businesses, including RACV, Deliveroo, The Good Guys, Samsung, and BWM, to name a few.
The acquisition is forecast to deliver $12 million EBITDA in FY20 to Uniti; 1300 Australia delivered FY19 EBITDA of $10.2 million.
The acquisition is further backed by Uniti's confidence in 1300 Australia's future performance, with 99 per cent of 1300 Australia's revenues recurring and well defended, given the "highly integrated nature of Phonewords within the sales, marketing and service functions of 1300 Australia's customers".
"The acquisition of 1300 Australia is a significant event for Uniti Group, delivering material, well defended earnings and remarkably strong free cash flow," says Uniti chairman Graeme Barclay.
"In terms of incremental earnings contribution, this acquisition is our largest to date and provides 'infrastructure-like' returns in our Specialty Telco Services pillar, without the usually accompanying capital expenditure."
"We are excited to be able to add 1300 Australia to the UWL Group, toward the end of what has been a remarkable year for our Company in terms of delivering shareholder value."
Uniti has been on an acquisition spree during 2019, with the 1300 Australia acquisition further expanding the group's horizons.
In August Uniti acquired builder and wholesale operator of private fibre networks LBNCo for $100 million.
The recently-listed telco also scooped up Jordan Grives' Fone Dynamics and Call Dynamics in the space of two weeks in May for around $7 million in total.
Uniti intends to lump 1300 Australia with Fone Dynamis and Call Dynamics under its third 'Specialty Services' pillar of the business, with the three to become "highly cash generative and directly complementary" in tandem.
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