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NetComm Wireless backs selling itself to Casa Systems for AU$161 million

American company to offer a 53 percent premium to turn Australian company into a subsidiary.
Written by Chris Duckett, Contributor

The NetComm Wireless lab used for developing NBN solutions

(Image: NetComm Wireless)

The board of NetComm Wireless has recommended shareholders back a scheme that will see the Australian networking equipment supplier become a wholly-owned subsidiary of Casa Systems.

The transaction is valued at AU$161 million, with Casa offering AU$1.10 per share, a 53 percent premium on Netcomm's February 20 closing price of AU$0.72.

"At a significant premium to the current trading price, Casa Systems' offer provides NetComm shareholders with certainty of value and the opportunity to realise their investment in full for cash," NetComm chair Justin Milne said.

"NetComm's customers will benefit from the resultant increase in scale to deploy unique telecommunications technology solutions, as well as a broader product suite and service capability."

Casa Systems chair and CEO Jerry Guo said the purchase would allow his company to added fixed wireless to its portfolio, as well as diversify its revenue streams and geography.

A shareholder meeting to vote on the scheme, and its implementation, is set for June, the companies said.

At the same time, NetComm announced its managing director and CEO Ken Sheridan was stepping aside due to family health reasons. Sheridan will continue as an executive director.

"I am honoured to have been part of NetComm's senior management team over the past eight years. Over this time the Company has grown from revenue of AU$67.6 million and EBITDA of AU$5.2 million in FY2011, to revenue of AU$182 million and EBITDA of AU$20.5 million in FY2018," Sheridan said.

"We have expanded our relationships with NBN and AT&T, brought on new tier 1 telecommunications clients such as Bell Canada, and developed world-leading fixed wireless and distribution point broadband technologies."

Netcomm CTO Steve Collins has been appointed as interim CEO.

The company also announced its first half results on Friday, posting record revenue of AU$94.3 million, up 6.5 percent on last year, and earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$8.3 million, a drop of AU$0.9 million compared to the same period last year.

"The growth in revenue achieved over the half was largely attributable to the scaling of network connection device (NCD) orders from NBN and sales of fixed wireless devices to multiple telecommunications carriers around the world," Milne said.

"The decline in EBITDA reflects the change in our sales mix, with NCD sales having a lower margin than distribution point units, as well as higher operating expenses in part related to developing our 5G capabilities which will underpin the next phase of our growth."

For the full year, Netcomm said it expects revenue to grow by 15 to 20 percent, and EBITDA to be in the range of AU$15 million to AU$18 million.

In August, the company reported EBITDA of AU$20.5 million on revenue of AU$182 million.

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