Melbourne IT sells international domain business to fund InfoReady acquisition
Melbourne IT has announced it will be selling its international domain name business, saying it plans to use the funds to drive growth of its new managed solutions offerings in both its SMB and enterprise services divisions, as well as to subsidise the AU$15.4 million acquisition of InfoReady.
The company said the sale of its domain business will allow it to focus on growing its digital solutions business, which is consistent with the group's strategy, given that in this context the international domain division was increasingly "a drag" on the performance of the SMB division.
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Melbourne IT has agreed to sell its international domain business for a sale price in the range of AU$8.1 million to AU$8.5 million. The sale of the domain business will be subject to customary closing conditions, and is expected to be finalised by April 30.
In light of growing its managed solutions division, the company said the acquisition of InfoReady will complete its enterprise service strategy and will sit alongside its existing cloud, mobile, security, and cloud-enabled application development.
Melbourne IT believes in the 2016 calendar year, InfoReady will generate approximately AU$3.4 million in underlying earnings before interest, tax, depreciation, and amortisation (EBITDA).
As part of the acquisition, InfoReady will retain its branding as part of Melbourne IT Group while operating as the data and analytics practice within Melbourne IT enterprise services business.
Melbourne IT added InfoReady director Justin Parcell will lead the data and analytics business, while director and founder Tristan Sternson will take on a senior leadership role within the company's enterprise services division.
The InfoReady deal follows on from Melbourne IT's acquisition of Outware Mobile and Uber Global Group in 2015.
Additionally, Melbourne IT unveiled plans to raise AU$15 million of new equity via an underwritten institutional placement. The company said it will use the funds to balance the purchase of the acquisition of InfoReady and strengthen the company's balance sheet, which the company currently predicts will reach peak debt of AU$46 million in the second half of 2017 calendar year, AU$9 million less than previously forecast.
According to Melbourne IT managing director Martin Mercer, the deals will accelerate the company's performance, both operationally and financially.
"This package of transactions is earnings accretive and substantially completes our investment in acquiring capability for the Enterprise Solutions business. While the sale of the international reseller business removes a significant drag on SMB growth and allows us to focus on its digital solutions strategy in Australia," he said.
Melbourne IT also provided revised guidance for the 2016 financial year, forecasting statutory EBITDA will be AU$27.1 million, instead of AU$24 million as announced during the February results.