JSE-listed telecommunications firm Huge Group, which is on a hunt for buys, announced on Friday that it has entered into an agreement to buy 100% of local ICT provider Centracom for R82 million. By Gugu Lourie
The telecoms firm – which has raised R1.2 billion for future acquisitions – said the acquisition of Centracom would be settled via an issue of vendor shares and cash.
The South African-based telecoms firm said the acquisition of Centracom would enable Huge to increase its customer base by 20% to 13 000 and enhance annuity revenue cash flows and increase the number of resellers or business partners by 20%.
The transaction will also enable Huge to aggressively compete with voice over Internet protocol (VoIP) rivals and provide an additional products and service such as data and cloud based services to its existing customer base.
The company added that based on Centracom’s revenues for the twelve months to 28 February 2015 and it’s most recently published results, had the proposed transaction taken place at the beginning of that financial year, it would have the had the effect of increasing Huge’s revenues by 42%.
The acquisition of Centracom is part of Huge’s strategy to supplement its high rate of organic growth by growing earnings aggressively through strategic acquisitions.
Centratel Group Investments was founded in 2001 by Michael Aitken and Steven Dent. Centracell (sim-based LCR), Centravoice (PBX Distribution), Centrafin (asset-based finance), and Cignale (PBX sales, installation and service) were founded with a focus on offering hardware and services within the ICT sector of South Africa.
Centracom was established in 2008 to consolidate all of Centratel Group Investment’s offerings and provide a solution to replace traditional LCR (Least Cost Routing) technologies through a cheaper and more efficient alternative – Voice over Internet Protocol known as VoIP.
It also offers connectivity through DSL, Diginet,Fibre, LTE and Wireless and aggregates its connectivity from a number of networks into its MPLS core, allowing it to offer cost-effective pricing through economies of scale. It offers its customers an infrastructure footprint covering 98% of South Africa.
The deal is subject to approval by the JSE, ICASA and the Takeover Regulations Panel.
Huge’s major shareholders include Peregrine Equities with 13.14% interest, Pacific Breeze (an indirect beneficial holders related to the company’s CEO), Praesidium Family Trust holds 9.15%, Eagle Creek Investments 223 owns 8.84%, Huge Telecoms holds 8.70% and Praesidium Hedge Fund holds 7.75%.
These shareholders have stuck with Huge Group even when it was embroiled in a five year legal battle with mobile phone operator MTN and profits of its main operating company Huge Telecom’s had been hit by regulatory changes.
Huge Group – which has a market capitalisation of more than R438 million –has seen its stock rise close to 216% in the past three years and dropped 11% in the past seven days.
The counter is currently trading at R3.50 a share for a healthy 56% growth in the past year.