Investor makes A$3 billion bid for Australia's Uniti

Uniti Group has confirmed that a group of funds led by HRL Morrison & Co has tabled a takeover bid worth in excess of A$3 billion.

The Australian telecoms operator, whose extensive fibre-to-the-premises (FTTP) infrastructure was doubtless a draw for the investors, responded to media speculation on the bid that triggered a halt in trading on the ASX.

“Uniti confirms it has entered into exclusive discussions with HRL Morrison & Co, on behalf of its managed funds and clients,” the telco said, adding that the talks are non-binding and their outcome uncertain.

Morrison & Co has offered A$4.50 per share in cash, “which is within the value range mentioned in the media speculation,” Uniti said. A raft of Australia and New Zealand financial press reports, including Business News Australia, put the figure at A$3.1 billion, or around US$2.2 billion.

The exclusivity period will run until 22 April, Uniti said, which perhaps raises questions as to whether it is expecting other potential buyers to emerge in the coming weeks.

It is doubtless an attractive prospect, with its all-important infrastructure assets and a solid financial footing. Before the Morrison & Co announcement its share price had been on the decline since the start of the year, but – as the Wall Street Journal points out – that is broadly in line with the local tech market. The takeover bid brought an uplift and the firm is currently trading at around the A$4 mark.

Uniti’s share price fall belies its recent performance. The firm turned in a strong set of financials for the first half of its current fiscal year last month, with revenues doubling year-on-year and earnings growing by 140%, although it’s worth pointing out that the firm made a handful of acquisitions in late 2020. Looking at organic growth, Uniti notes that its EBITDA in calendar 2021 was up by 30% on the previous year.

Meanwhile, it is generating cash, reducing leverage, and growing customers; its FTTP contracted order book at the end of the reporting period stood at 292,200 premises, up 44% on-year.

“Well over 90% of our earnings are now generated from high margin, recurring, annuity revenues which are delivered predominantly on our owned super-fast FTTP networks, and this ratio will continue to expand as our contracted FTTP order book of nearly 300,000 premises deploys over the years ahead,” said Michael Simmons, Uniti Group’s chief executive, alongside the results.

“With integration and simplification largely completed in 2021, Uniti is now primed for continued organic growth in greenfields and adjacent property markets and inorganic growth through asset acquisitions aligned to our core infrastructure business,” he added.

Simmons has an extensive career history in telecoms, including a stint as Vocus CEO. It is certainly a coincidence that Vocus’s New Zealand business is also making headlines in Antipodean M&A this week – the firm got the regulatory go-ahead for a merger with 2degrees on Tuesday – but there is an intriguing link here.

According to The Australian, Vocus Group – now owned by Macquarie, incidentally – is readying a counter-bid for Uniti. Naturally, it’s just a rumour at this stage, but don’t bet against a bidding war for Uniti in the near future.