5G Networks Limited (5GN) – proposed acquisition of Webcentral Group Limited (ASX: WCG), successful completion of $27.5m institutional placement and debt facility increase.

Proposed Acquisition

Webcentral Group Limited (WCG or Webcentral) has announced today the terms of a non-binding indicative proposal given by 5GN to WCG (5GN Proposal) to acquire on an agreed basis all of the shares on issue in Webcentral. 5GN notes that the Board of WCG has advised that they consider the 5GN Proposal to be a Superior Proposal to the Web.com Proposal (see below). A copy of the Webcentral Announcement is attached.

A summary of the key terms of the 5GN Proposal including defeating conditions are set out in the WCG Announcement. The 5GN Proposal remains subject to agreement of a bid implementation agreement between 5GN and WCG.

The implied price set out in the 5GN Proposal is 17.7 cents per WCG share (based on 5GN’s closing share price on Thursday, 3 September 2020) (Offer Price) which implies an equity value of WCG of approximately $21.6 million.

As set out in the Investor Presentation 5GN released to ASX on Friday 4 September 2020:

• In a scenario where the businesses are combined, 5GN expects that it can generate synergies across both businesses of over $7 million per annum on a run rate basis.
• On a strategic shareholding basis where 5GN does not hold 100% of WCG, 5GN expects that it can generate synergies across both businesses of over $3 million per annum on a run rate basis.
• The proposed acquisition is expected to be transformational for 5GN’s earnings, with earnings per share of 5GN expected to more than double on a pre-synergies basis, and further increased on a post-synergies basis.

The Offer Price represents an attractive and significant premium compared to the offer of 10 cents per WCG share available to shareholders in WCG under the Scheme of Arrangement proposed by Web.com Group Inc. (Web.com) (Web.com Proposal) as announced on 13 July 2020.

5GN has acquired 10.1% of the shares in Webcentral. 5GN confirms that it does not intend to vote its 10.1% interest in Webcentral in favour of the scheme with Web.com.

WCG stated in its Announcement that “Keybridge Capital Limited (Keybridge), whose last public disclosure indicated that it had a 9.24% economic interest in WCG shares (comprising 5.94% by way of physical holding and 3.3% by way of a cash settled swap), has also advised WCG that Keybridge “presently intends” to vote against the Scheme”.

Successful Completion of $27.5M Institutional Placement

5GN is today pleased to announce the successful completion of the placement of 5GN shares to raise $27.5 million at an offer price of $1.80 per share (Placement). The Placement was completed with a broad range of new and existing institutional investors.

5GN notes that the 5GN Proposal is fully funded through the $27.5 million Placement and from existing cash on balance sheet and available debt facilities (without taking into account the increased debt facilities referred to later in this  Announcement).

The Placement was completed on Friday, 4 September 2020. Approximately 15.28 million new shares will be issued to successful applicants under the Placement. As a result of the successful completion of the Placement, 5GN’s ordinary shares will recommence normal trading at 10:00 am Monday, 7 September 2020 or such later time as required by ASX. The new shares issued under the Placement will rank equally with existing 5GN fully paid ordinary shares on issue.

New shares subscribed for under the Placement are expected to be settled on Wednesday, 9 September 2020 and be issued and, in the case of the new shares, expected to commence trading on ASX, on Thursday, 10 September 2020.

Concurrent with the Placement, 5GN founder Joe Demase has sold 2.78 million shares, representing 14.5% of his shareholding in 5GN at $1.80 per share. Mr. Demase will remain 5GN’s largest shareholder with a relevant interest in approximately 16.2 million shares, equivalent to approximately 15.3% of the ordinary shares of 5GN on issue (post the Placement). Mr. Demase sold the shares in part to satisfy a personal tax obligation and to fund the exercise of 5GN performance rights which may be exercised in the future. Mr. Demase is a strong believer in the future prospects of the business and has no immediate plans to sell more shares. Settlement for this will occur concurrently with the settlement of the placement.

Wilsons Corporate Finance Limited was the lead manager to the Placement and Financial Advisor with respect to the proposed acquisition.

Increase in Debt Facility Limit with CBA

5GN is today pleased to announce a credit-approved increase in its existing debt facility with Commonwealth Bank of Australia (CBA) to $14.5 million, an increase of $8.4 million from the current facility limits.

All other terms and conditions under the current debt facility agreements will continue to apply.