Council-backed company earmarked for $27.5 million take-over
SOUTHERN Phone, one of the largest telecommunications companies in regional Australia, has entered into a conditional agreement under which AGL Energy Limited is proposing to acquire the company.
Formed in 2002 by NSW councils, Southern Phone has 35 shareholders including Coffs Harbour City Council, Bellingen Shire Council and Upper Lachlan Shire Council.
AGL's 100% takeover is an all cash offer of $27.5 million.
This would deliver a return of $785,714 on each shareholder's total investment of $2.
When the company was established using a $4.77 million grant from the Australian Government's Networking the National scheme, the councils involved purchased two shares for just $1 each.
Southern Phone Managing Director, David Joss said given the shareholders are all local councils, the proposed acquisition by AGL presents a great opportunity for these councils to utilise the return to address priorities facing their local communities.
"Our company has grown to become one of the most successful providers of fixed line, mobile and Internet communications services across regional Australia," Mr Joss said.
"Our unique Local Government ownership structure has created a community focused business that has achieved great success. However, with the advent of the NBN the need for achieving a greater share of the market has significantly increased and the timing is now right for a new shareholding structure.
"AGL is committed to maintaining the Southern Phone brand and products, as well as the existing business operations and telecommunications services to our 100,000 customers, across regional Australia.
"Importantly, AGL will continue to retain the Southern Phone team.
"We believe the AGL offer is a great opportunity for our shareholders, our staff, our customers."
Southern Phone's current constitution limits ownership to Australian local government shareholders and it can only self-generate capital.
Although community ownership has been a strong tenet of the business in the past, now is the right time to change the structure and establish the ability to leverage shareholder capital, according to the company's directors.
Mr Joss said the Southern Phone Board unanimously recommends shareholders accept the AGL offer.
"The board has made this decision based on independent advice that the offer represents fair value for shareholders and provides a great outcome for the company, its customers and the regional communities we serve," he said.
AGL CEO and Managing Director, Brett Redman, said the acquisition presents a range of exciting opportunities for their residential and small business customers.
"We are focused on responding to our customers' evolving needs as we transform from a major energy retailer to a major, broader essential service provider."
"We believe the acquisition, as part of our broader strategy, will create significant value for our connected customers and also for our shareholders."