Huge Group plans to buy out voice, connectivity and cloud solutions provider Centracom for R81.6 million.
The telecoms services provider announced via SENS that it had signed a memorandum of agreement to acquire 100% of the issued share capital of Centracom.
The company, which is listed on the Johannesburg Stock Exchange's AltX board, says 90% of the purchase consideration will be settled by Huge via the issue of vendor shares.
"Huge is intent on supplementing its high rate of organic growth by growing earnings aggressively through strategic acquisitions," it said in its cautionary announcement on the deal.
The firm expects its acquisition to enhance its annuity revenue cash flows and boost its customer base by 20%, to over 13 000 customers. It expects the purchase to see Huge's number of billed minutes increase by over 50%.
Huge predicts improved purchasing power with upstream suppliers and "the ability to aggressively compete with voice over Internet Protocol competitors".
"An acquisition of Centracom will provide benefits which will result from economies of scale and which are expected to be significant and immediately realisable. The levels of synergy in terms of eliminating duplicated costs within the two businesses are high."
Huge says if it considers Centracom's revenue for the last financial year, if the acquisition had taken place at the beginning of that financial year, "it would have had the effect of increasing Huge's revenue by 42%".
As at 28 February, Centracom's net asset value was just over R2 million and it had generated profit after tax of R4.4 million and cash flow from operations of R8.6 million.
In terms of the memorandum of agreement, shareholders have granted Huge an exclusivity period of 180 days in which to negotiate the transaction agreements and close the proposed transaction.
Centracom aggregates converged voice, connectivity and cloud solutions services, and says it offers customers an infrastructure footprint covering 98% of South Africa.
Huge Telecom, the principal operating subsidiary of Huge, provides communications services to corporate organisations and residential customers in South Africa and says it has over 11 000 customers.
The deal is still subject to the approval of shareholders and regulatory and competition authorities.
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