5G Networks and Webcentral, the remnants of Arq Group that was formerly the company known as Melbourne IT, have entered into a merger agreement that will see the former become a wholly-owned subsidiary of the latter.
Under the terms of the agreement, Webcentral will acquire 100% of the fully paid ordinary shares of 5GN, and 5GN shareholders will receive two Webcentral ordinary shares for each 5GN share they hold.
Once the scheme is implemented, 5GN shareholders will hold approximately 52% of the combined entity, while Webcentral shareholders will own the remaining 48%.
The merger was recommended by independent board committees of both companies.
Webcentral flagged the merger would create value through establishing a larger combined entity, while also help simplify sales delivery to its 330,000 plus customers.
On the revenue front, Webcentral said the merged group would allow for "cross sell and up sell opportunities" across a larger combined market, as well as generate cost savings of approximately AU$2 million and a 20% lift in earnings before interest, tax, depreciation, and amortisation from consolidating its operating platform and staff costs.
"The business transformation strategy at Webcentral is accelerated through this merger. By bringing the two businesses together, we modernise our systems and technology platforms, improve support for customers and broaden our capability to drive profitable market share growth," Webcentral chair Joe Gangi said.
"Importantly, by strengthening our financial position, we can now pursue and execute an aggressive acquisition plan for becoming an ASX300 listed company. The independent board are therefore delighted for our shareholders, customers, and the Webcentral business in supporting this merger opportunity with 5G Networks."
The decision by the companies comes after 5GN announced last year its intention to takeover Webcentral. However, at the time 5GN did not have a dominate shareholding in Webcentral, nor did 5GN outline intentions it was going to acquire the remainder of Webcentral. As of 26 April, 5GN owned only 44.6% of Webcentral.
Subject to approval, the deal is expected to be implemented by October or early November.