Singtel to take big hit on Trustwave sale

Singtel is pushing forward with the sale of its cybersecurity business as part of a business streamlining push that will see it focus on 5G and new growth areas.

Rumours surrounding the Singaporean telco’s plans for its Trustwave unit have been swirling for some time; indeed, it’s more than a year since it announced a strategic review of the Chicago-based unit as part of a broader reshuffle. The latest report on the firm’s future comes from Bloomberg, whose sources say Singtel has been meeting with financial advisors as part of its preparations for a sale.

There’s nothing unusual in telecoms operators selling non-core assets to narrow their focus elsewhere. It’s happening throughout the industry. And Singtel itself has already jumped on that particular bandwagon, having offloaded most of its tower assets in Australia for A$1.9 billion late last year and ditched US-based digital media and advertising subsidiary Amobee for US$239 million last month.

Incidentally, when it presented its numbers for the financial year ending March 2021, the telco highlighted weaknesses at both Amobee and Trustwave as part of a pretty dire results announcement. Specifically, in a letter to shareholders Singtel CEO Yuen Kuan Moon and Chairman Lee Theng Kiat noted that “economic tremors from the pandemic and rapid shifts in the digital marketing and cyber security industries dampened growth for Amobee and Trustwave.” It came as no surprise then that both businesses were up for review and Amobee was fairly quickly out of the door. That Trustwave may well be next seems like a logical conclusion.

According to Bloomberg, Singtel is still at a preliminary stage in its deliberations over Trustwave and could yet choose to retain the asset. That said, the newswire predicts it will see interest from other firms in the same industry and from investment funds. Naturally, Singtel was disinclined to comment.

It could raise between US$200 million and US$300 million from the sale of the asset, according to the sources. And that is probably the most noteworthy aspect of the story at this point.

Even at the top end of that predicted valuation, Singtel would be selling Trustwave for significantly less than half of what it paid for it less than a decade ago.

Singtel completed the acquisition of Trustwave in September 2015, a few months after it announced a deal that valued the company at $850 million. Singtel agreed to part with $810 million for a 98% equity interest, excluding debt.

At the time Singtel was buoyant about the potential of the global managed security services market, but a few years on and it was pretty clear the telco was not capturing as much value as it had hoped. It booked a $250 million writedown against its investment in the asset in the second half of the aforementioned financial year and in the most recent financial year – October 2021, to be exact – it sold Trustwave’s payment card industry compliance business SecureTrust for $80 million.

Surely the writing is on the wall for the rest of the business.


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