Singapore Tech Services Firm CSE Global Acquires WA Telco Services Firm ASTIB for A$50m and 7.35*FY10 Earnings

5th Jan 2011. Singapore-based international technology group, CSE Global Limited (SXG 544) has announced the acquisition of the Astib Group, one of the largest specialist communications organisation in the Asia Pacific region for up to A$50 million.

Under the terms of the deal, CSE Global will pay the A$30 million in cash and almost A$5 million worth of CSE shares, which were valued at $S1.34 ($1.02) a share yesterday. In addition, they will pay another 15 million CSE shares if ASTIB meets certain profit targets over the next two years, valuing the total deal at $49.6 million.

Bob Sofoulis, who established Perth-based ASTIB Group with his wife Wendy in 1995, said yesterday that Singapore-listed technology firm CSE Global was the right company to take his business forward after a series of ambitious acquisitions.  The Sofoulises are ASTIB’s sole shareholders.

“We could only take it (the business) so far — when you’re competing against multi-national companies like Honeywell with multi-billion-dollar balance sheets, we
either had to pull back or take the next step, ” Mr Sofoulis said. “The synergies between ASTIB Group and CSE are very closely aligned and that’s why we approached them.”

Mr Sofoulis, 51, started the business after working as an instrument fitter at several energy and resources companies, including Alcoa, Woodside and Wesfarmers and noticing a niche opportunity. After a series of smaller acquisitions, the group took over competitor Memo Communications in 2007 and expanded into sales and other services. It now provides telecommunications engineering, design, installation and support services to clients, including BHP Billiton and ConocoPhillips.

Under the sale terms, Mr Sofoulis has agreed to stay on at the merged group in a senior role for 30 months and will become a director of CSE’s Australian subsidiary.

The purchase consideration is: –

  1. at completion, A$30m to be paid in cash and 5 million ordinary shares of CSE (“completion payment”); and
  2. by the first half 2011 (end June), if a profit before tax (PBT) of A$5m is achieved, then an additional consideration will be paid consisting of 5 million ordinary shares of CSE; and
  3. if the 5 million shares in point 2 of this section are not issued because PBT of A$5m was not met, then the shares will only be paid out in full if the Company achieves the target set out in point 5 of this section; and
  4. if the targets in points 2 and 5 of this section are not met, then the 5 million CSE shares will be paid out as additional consideration in accordance with the following linear scale within three months of the completion of the audit;
    1. 2011 Full Year PBT A$6m – 0 shares issued
    2. 2011 Full Year PBT A$12m – 5 million shares issued; and
  5. if the profit before tax for ASTIB is greater than A$12.336m for the calendar year 2011, an additional 5 million ordinary shares of CSE will be paid within 3 months of the completion of the audit; and
  6. if the profit before tax for ASTIB is greater than A$14.186 million for the calendar year 2012, an additional 5 million ordinary shares of CSE will be paid within 3 months of the completion of the audit; and
  7. if any ordinary shares of CSE due under clauses 3, 4, 5 and 6 are forgone because the targets were not achieved, then there is a final opportunity for the Vendors to receive any forgone ordinary shares of CSE. If after completion of the 2013 audit, it can be demonstrated that ASTIB for the calendar years 2011, 2012 and 2013 has achieved an average PBT equal to or greater than A$14.186m, then any forgone ordinary shares of CSE will be issued to the Vendors as soon as the shares can be issued and listed on the Singapore Stock Exchange.

The purchase consideration of cash of A$30mn and up to 20 million ordinary shares of CSE (approximately SGD64.7 million) was at having taken into account the following:-

  1. The A$4.742m profit after tax for the financial year ended 30 June 2010 of ASTIB as tabled below under financial effects of the acquisition;
  2. The profit before tax targets set for 2011 and 2012;
  3. The fit between ASTIB and the CSE’s operations;
  4. he track record and customer base of ASTIB in Australia;
  5. The net assets of ASTIB as at completion of AUD13 million (approximately S$17.0 million);
  6. Established and proven profitable operations in Australia;
  7. Established track record in mining, oil and gas; and
  8. The future prospects of ASTIB.

Using the completion payment of A$30m and 5 million ordinary shares of CSE, the price to earnings for the financial year ended 30 June 2010 is 7.35 times. Using the maximum consideration of A$30m and 20m ordinary shares of CSE and the meeting of the 2012 profit before tax target, which translates to a profit after tax of S$13.0million, the price to earnings is 4.98 times. The price to net assets at completion is 3.81 times and 2.69 times respectively using maximum consideration and completion payment.

The deal, which beat rival offers from Australian and US businesses, was co-ordinated by West Perth business brokers Mergers and Acquisitions.

Posted in M&A - Asia Pacific, M&A - Austr - S/W & Services and tagged , , , , , .