DataPro, the soon-to-be-listed niche telco and premier Internet service provider, commented yesterday that it is comfortable with the R324 million acquisition by M-Web Holdings of the Internet service provision business of Tiscali. The company said it would not be objecting to the competition authorities.
The price tag paid for Tiscali "places a higher strategic value on DataPro - and a higher valuation on the Internet service provision market in general", said James Herbst, director responsible for finance at DataPro.
Herbst said the purchase price of Tiscali from a price earnings perspective - which, at R324 million, prices Tiscali at a significant price earnings ratio, is well in excess of relative ratios in the market - thus creating a natural underpin to the overall industry.
"While some people might think that the R324 million price tag may be too high, we believe - on deeper analysis - it is arguably a fair price relative to the strategic value of Tiscali to the marketplace. The purchase price is not based on the traditional market principles of price earnings but rather, it seems, on revenue multiples. If DataPro is re-rated on these more strategic principles, then our real and strategic value needs to be significantly re-assessed upwards."
He said, however, that M-Web is going to have to work hard to gain business benefits out of the acquisition and needs to "sweat good returns out of Tiscali`s assets".
"Overall, this purchase shows the major consolidation that is taking place in the ISP sector and places DataPro, as the only independent niche telco in the Internet service provision space, in a very strong position - and provides it with a lot of market allure. It is really good news for our listing - and potential ongoing performance - once listed."
Last week DataPro, the biggest independent ISP, announced it is to list on AltX, the alternative exchange - making it the only ISP to be listed in SA.
In terms of the planned listing, DataPro will initially list on the development board via a reverse listing into Casey Investment Holdings Limited - which is presently a cash shell - and will, by October, move to AltX. Casey will be renamed DataPro Group Limited.
There are currently 74 979 630 Casey shares in issue, with an undertaking to issue a further 154 000 000 shares - at 55c a share - to take the total number of issued shares to 228 979 630. Once listed, DataPro believes it will be in a strong position to consolidate a portion of the lucrative ISP market. This will be achieved by a number of acquisition possibilities and the market mechanism of AltX.
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