BigAir Group To Acquire Allegro Networks for up to A$10.5m; approx 5*contributed EBITDA

22nd May 2012. Fixed wireless broadband provider BigAir Group Limited (ASX:BGL) has announced that is has entered into a binding agreement to acquire all of the shares in Allegro Networks Pty Ltd and RadioCorp Pty Ltd, and that the parties will conclude the sale and purchase agreements on or before 31 May 2012.

BigAir will acquire Allegro for $7.5m plus a FY2013 revenue based earn out of up to $3.0 million comprising:

  • $3.75 million in cash payable on the date of completion;
  • $3.75 million in BigAir shares to be issued at 36.8 cents;
  • Capped revenue earn-out of up to $3 million payable within 30 days of the release of Allegro’s FY2013 audited accounts.

For an earn-out to be payable, Student Revenue in FY2013 must exceed $2.2m, or non Student revenue must exceed $3.3m in FY2013.

BigAir’s existing cash reserves are sufficient to fund the initial $3.75 million due on Completion. The future revenue earn-out is expected to be paid from BigAir’s operating cash flow. BigAir will remain debt free.

Allegro will operate as a wholly owned subsidiary within the BigAir Group, and the Managing Director of Allegro, David Waldie, will remain with Allegro.

Allegro is expected to generate revenue between $5m and $6m in the 2013 financial year. Following a short period of integration, it is expected to deliver approximately $2m annualised EBITDA, and will be significantly EPS accretive. Earnings in subsequent years are expected to further improve following completion of network integration and once new sales and marketing initiatives start to leverage the expanded network footprint and service offerings.

Allegro is a Queensland based Telecommunications carrier founded in 2005 that has its own high speed fixed wireless network providing blanket coverage over South East Queensland – extending from the Gold Coast through Brisbane and the Sunshine Coast and the growth corridors in between. In 2006 Allegro invested in licensed 3.5GHz spectrum and built Australia’s first certified WiMAX network. Allegro is also extending its fixed wireless network into the key regional growth markets of Gladstone and Mackay.

Allegro is an established supplier in the tertiary student accommodation Internet market, currently servicing more than 60 sites that contain approx. 8,000 student beds.

BigAir owns and operates Australia’s largest metropolitan fixed wireless broadband network. BigAir is also the leading provider of outsourced managed Internet services in the tertiary student accommodation market within Australia, with network infrastructure at more than 50 sites across Australia. Once Allegro is combined with BigAir’s, the total number of student beds serviced by BigAir will be almost 27,000 across 124 sites.

Commenting on the acquisition of Allegro, BigAir Chairman, Paul Tyler, said: “The acquisition of Allegro is highly strategic and synergistic. It cements BigAir’s position as the leading operator in our two core markets – the emerging corporate fixed wireless market, and the tertiary student accommodation Internet market. The acquisition is expected to deliver significant cost, revenue and capital expenditure synergies.”

“In combining Allegro’s retail corporate customers, service offering and spectrum assets with BigAir’s national network coverage and access to capital, the customers of both organisations will benefit from the expanded service offering and network coverage, and the combined engineering and commercial strengths of the two organisations.”

The acquisition is subject to:

  • Approval of the long form sale and purchase agreements prior to 31 May 2012
  • The Managing Director of Allegro entering into a service agreement
  • BigAir being satisfied with the outcome of its due diligence investigations and other standard Conditions Precedent
  • Completion on or before 31 May 2012.

BigAir has announced that the integration of its 2010 acquisition, Clever Communications, was now largely complete following the relocation of its former Melbourne headquarters and data centre during April. A network integration project that fully integrated both companies’ wireless networks is also nearing completion. It has also announced that it had completed significant network expansion in the last few months to service new customers in its metropolitan footprint – Sydney, Melbourne, Brisbane, Perth, Adelaide, Newcastle, Gold Coast, Sunshine Coast and Darwin. It said also that networks were under construction in Canberra, Hobart and Port Hedland.

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