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TeamTalk approve Farmside purchase for up to $42M

Tuesday 11th December 2012

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Shareholders of TeamTalk, the owner of the CityLink fibre-optic broadband service, have voted in favour of the acquisition of Farmside Group for up to $42 million to extend its reach into rural areas.

The Wellington-based company has agreed to buy Farmside for an upfront payment of $19 million in cash and $12 million in TeamTalk shares, with an additional $7 million cash and $4.1 million in scrip in potential earn-outs over the following 12 months.

Farmside will operate as a subsidiary of TeamTalk and continue to be based in Timaru. Farmside's sellers will also be entitled to appoint a director to the TeamTalk board.

The acquisition will almost double TeamTalk's revenue, with Farmside reporting sales of $25.4 million in the 12 months ended June 30, some 43 percent of pro-forma revenue. Still, the rural telecommunications firm's margins aren't as fat as TeamTalk's with pre-tax earnings of $2.1 million, or about 20 percent of pro-forma earnings before interest and tax.

TeamTalk shares rose 2.8 percent to $2.98 and have climbed 36 percent this year.

DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.

BusinessDesk.co.nz

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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