Superloop VS Aussie Broadband | Dirt Report

Aussie Broadband’s proposed Superloop acquisition

Aussie Broadband had reported strong revenue growth of 17.7% in the first half of FY2024. Against that background, it proposed acquiring Superloop for approximately $467 million. The offer valued Superloop at 95 cents per share, based on the closing price of Aussie Broadband shares on 23 February 2024.

The proposal represented a premium of approximately 33% to Superloop’s average share price of 71 cents. Aussie Broadband also acquired approximately 19.9% of Superloop’s shares. The transaction was intended to significantly expand Aussie Broadband’s scale in the Australian telecommunications market.

Origin’s move to Superloop

The proposed acquisition became more significant after Origin decided to move its NBN wholesale arrangement from Aussie Broadband to Superloop. The move involved approximately 130,000 NBN subscribers, as well as Origin’s associated infrastructure.

On 13 March 2024, Aussie Broadband received unexpected notice that Origin would terminate its existing white-label agreement, effective 12 April 2024. Under the arrangement, Aussie Broadband provided network services and also handled functions including technical support, accounts, billing, the customer portal, collections and call-centre services.

Origin planned to move to a Layer 3 wholesale model. Under that model, Aussie Broadband would continue providing network services, while Origin would take responsibility for the technical and account functions previously supplied by Aussie Broadband. The existing agreement was expected to contribute an estimated $14 million in EBITDA to Aussie Broadband during FY2024.

Share price reaction

The announcements had a substantial effect on both companies’ share prices. Following the announcement of the proposed Superloop acquisition on 23 February, Aussie Broadband’s share price rose from approximately $3.80 to around $4.70, before settling near $4.30.

After the Origin announcement became public, Aussie Broadband’s share price fell to approximately $3.55. The video describes this as a decline of almost 20%, and notes that the price moved below the range in which it had traded for several months.

Superloop’s share price also moved sharply. It rose from around 70 cents to approximately 95 cents after the acquisition proposal, then climbed to around $1.40 following the announcement that it would receive Origin’s customers and services.

The 12% ownership dispute

On 15 March 2024, Superloop asked Aussie Broadband to dispose of enough shares to reduce its ownership below the 12% threshold. Superloop alleged that Aussie Broadband’s purchase of approximately 19.9% breached a provision in Superloop’s constitution.

The relevant provision requires statutory approval from Singapore’s Infocomm Media Development Authority, or IMDA, for acquisitions of 12% or more. Aussie Broadband later confirmed that it had not complied with the constitutional requirements when acquiring the stake, describing the breach as inadvertent.

The dispute is unusual because Superloop is listed on the Australian Securities Exchange, while the constitutional restriction relates to approval by a Singaporean statutory board. The video notes that the purpose and effect of this arrangement were not clear from the available information.

Federal Court proceedings

After Superloop sought to enforce the ownership restriction, Aussie Broadband commenced proceedings in the Federal Court of Australia, Victorian Registry, after the market closed on 18 March 2024.

Aussie Broadband is seeking permanent and interim injunctions. Its application seeks to set aside Superloop’s notice and restrain Superloop from acting on, or giving effect to, that notice. The proceedings concern whether Superloop can require Aussie Broadband to reduce its shareholding and how the constitutional provisions should operate in these circumstances.