​Melbourne IT to wholly acquire WME Group for AU$39m

The multi-million dollar proposed acquisition will see Melbourne IT expand its online marketing offerings.

Melbourne IT has announced the proposed acquisition of internet marketing service provider WME Group for approximately AU$39 million.

WME Group provides digital marketing solutions, including search engine optimisation, search engine advertising, and web design. WME Group's market-facing brands include WME, Nothing But Web, and Results First.

With WME Group under its brand, the Australian Securities Exchange (ASX)-listed company told shareholders on Tuesday it hopes to position itself as a market leader in online marketing solutions for small and medium sized businesses.

The proposed acquisition to wholly acquire WME Group will be funded from a combination of approximately AU$9 million in debt and AU$30.7 million in shares with an issue price of AU$2.10 each.

According to the company, the acquisition will have a positive impact of approximately AU$6.5 million to AU$7.5 million underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) for the 2017 financial year.

"The Melbourne IT of today is almost unrecognisable from the Melbourne IT of three years ago," the company's CEO Martin Mercer repeated on Tuesday, "This acquisition will build on the success we have experienced to date in providing managed marketing solutions for small businesses".

The WME acquisition follows the announcement Melbourne IT made in February that it would be acquiring the remainder of custom mobile apps development firm Outware Systems for a cost of AU$26.9 million.

The closing of the acquisition saw Melbourne IT's total consideration for Outware tip AU$57.8 million.

In June 2015, Melbourne IT scooped up 50.2 percent of Outware for AU$21.7 million. At the same time, the company also acquired options to extend that ownership to 100 percent two years later, calculated on Outware's EBITDA as of June 30, 2016, and June 30, 2017.

Melbourne IT then acquired another 24.9 percent of Outware shares in August 2016 for AU$9.24 million.

The remaining 24.9 percent purchase that was announced earlier this year will be finalised six months ahead of schedule, with the figure approximately AU$2.3 million less than previously expected. The final sum is dependent on Outware achieving its June 30, 2017, forecast, however.

Melbourne IT also acquired data and analytics solutions provider Infoready during the financial year for a cost of AU$15.4 million, a deal the company partially funded through cash received from the AU$7.8 million sale of its International Domain Name Registration (IDNR) business.

The company also paid AU$15.5 million for cloud services provider and domain registration provider Uber Global Group in February 2015.

The string of acquisitions leave Melbourne IT with an Enterprise Services division comprising mobile, data and analytics, and cloud services.

For the 2016 financial year, Melbourne IT reported a 91 percent increase year over year in net profit after tax to AU$10.7 million. EBITDA for the year was AU$28.2 million, up 71 percent from FY15's AU$16.5 million, on revenue of AU$168 million.

Last month, Melbourne IT experienced a large distributed denial-of-service (DDoS) attack on its DNS servers that disrupted its web hosting, email platforms, and access to the company's customer administration portal.

The DNS outage affected Melbourne IT and subsidiaries Netregistry and TPP Wholesale, with the DDoS attack bringing down the company's TheConsole, cPanel, Cloud Hosting, and Mail platforms services.

Netregistry, which was scooped up by Melbourne IT in 2014 for AU$50.4 million, boasts over 500,000 customers that were potentially affected by the DNS outage.

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