SP Telemedia to pay $373m in cash for Pipe Networks

Stuart Corner
Wednesday, 11 November 2009 10:56

IT Industry - Deals

SP Telemedia (ASX: SOT) has made a $373m cash offer to buy Pipe Networks (ASX: PWK) which operates an extensive network of optical fibre cables and data centres in Australian capital cities and which owns the newly-opened PPC-1 submarine fibre cable from Sydney to Guam.

"Pipe's extensive metropolitan dark fibre network wil increase SPT's capabilities as a data communications provider. In addition, PPC-1 gives us a competitive advantage with access to international bandwidth, allowing us to offer highly attractive products to both existing and new customers."

The offer, of $6.30 per share, represents a 15 percent premium the volume weighted average price over the past month and a 29 percent premium on the average over the past six months. It is also greater than the closing price of Pipe shares at any time since their listing.

The merger will create a company with a market capitalisation of $1.26b ($925m for Soul and $337m for Pipe) making it Australia's fourth largest listed telco, excluding Hutchison Telecommunications Australia of which only about three percent of the equity is floated.

SP Telemedia claims one of the largest networks in Australia with PoPs in all 65 Telstra call collection areas - a legacy of its acquisition some years ago of the Comindico network, built at a cost of over $300m but sold for fraction of that. The company was created by the merger of Soul with TPG and is also one of the largest broadband ISPs with close to 400,000 subscribers.

In addition to its newly completed submarine cable, Pipe boasts Internet peering points in all major capitals and it claims that its metro area fibre network connects to over 75 major data centres, 100 Internet and application service providers, 200 Telstra exchanges and more than 500 buildings

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