Vonex to acquire Nextel boosting ARR by circa $1M

By Jonathan Jackson. Published at Dec 18, 2020, in Technology

Vonex Limited (ASX:VN8) has today announced its intention to acquire Nextel’s business and operations as a going concern.

The acquisition will provide an immediate boost of approximately $1 million to Vonex’s base of annualised recurring revenue.

Following the success of its 2SG acquisition, which has allowed Vonex to develop new products and expand their offerings to its small and medium enterprise (SME) customers, Vonex’s pending acquisition of Nextel provides the company with an industry leader in the design, installation and maintenance of voice, data and communications networks.

Vonex will be hoping for similar success with Nextel that it has had with 2SG this year, particularly with its Wholesale acquisition.

As we have previously reported, VN8’s Wholesale’s product suite, which consists of improved service offerings and new product launches has achieved successful sales growth thus far in Q2 FY21, with Mobile Broadband orders +80%, Mobile Voice +310% and NBN with 4G backup +89% year-on-year.

Read: Wholesale and Retail divisions continue to drive Vonex’s impressive growth

Nextel has been in operation since 1990 and developed a reputation as a single-source provider to businesses in structured cabling, telephony systems and electrical fit outs.

It is also well-known for rolling out fibre, RFID and wireless networks to large-scale projects.

"We are delighted to welcome Nextel to the Vonex group,” Vonex CEO Matt Fahey said.

“Acquiring Nextel represents an ideal fit within our established M&A strategy, through which we focus on gaining scale in attractive markets while adding value for customers by expanding our cross-selling range of telco products and services.

"In Nextel, we see many of Vonex's existing characteristics in terms of capability and culture, which provides us with confidence that we can integrate the business quickly and simply.

“The acquisition of Nextel’s established operations will provide an instant expansion of the Company’s customer base, particularly in the key NSW market, and will be highly earnings-accretive.”

Nextel has a strong debt-free balance sheet and is supportive of institutional shareholders.

The acquisition will enable to further scale, as it execute its three-pillar growth strategy across Retail, Wholesale and Acquisition.

Details of the deal

The acquisition will be complete once Vonex has completed its legal and financial due diligence.

The company expects to have this completed prior 29 January 2021 and will outlay approximately $1.575 million, payable on completion of the transaction, comprising:

  • 5,502,795 ordinary shares at a deemed issue price of A$0.229 (being the volume-weighted average price of Vonex shares for the past 30 trading days), to be escrowed for 12 months post issue ("Consideration Shares");
  • A$315,000 in cash; and
  • An amount in cash equal to the cost of tangible stock items as at completion.

Vonex is looking forward to integrating Nextel's goodwill, staff and equipment, intellectual property, wholesale contracts with several major telecommunications companies, all end user customers being serviced by Nextel, stock and no debt.

The consideration represents a multiple of approximately 0.8x FY20 revenue and 3.5x FY20 earnings before interest, tax, depreciation and amortisation (EBITDA), making the acquisition accretive to the Company's earnings and cashflow.

The conservative cash component of the total consideration helps to preserves Vonex's cash position, while also highlighting the belief that the Nextel vendors have in Vonex continuing to grow the combined businesses and generating attractive returns for shareholders.

Vonex’s strategy continues to impress

With a large national presence across most major states in the country, Nextel's is able to service businesses in remote locations.

Its professional services team has rolled out systems from micro 4-5 handset users up to 1,000-end enterprise users.

Nextel has long-term relationships with tier-1 carriers, network partners and customers spanning a range of industries, including LJ Hooker, Endemol Shine Australia, 4 Pines Brewing Co, Lifeline and the Sydney Harbour Federation Trust, which should greatly contribute to Vonex’s growth moving forward.

Vonex feels there is an unmet need among Australian SMEs for telco services that are reliable, affordable, flexible, scalable and friendly to the new 'work from home' paradigm, hence its aggressive, yet measured acquisition strategy.

Vonex has focused on product-market fit, efficiency and customer satisfaction which strongly resonates with SME customer.

Nextel enhances Vonex’s ability to service this market.

The Company views Nextel's capabilities as highly complementary to those of Vonex, focusing on:

  • Immediate efficiency on margin on services revenue and at the wholesale supplier level;
  • Expertise in network infrastructure and cabling, representing a new service which Vonex can commence offering to its channel partners; and
  • Nextel's established presence across several niche verticals and strong standing in the NSW market.

Nextel's founder and Managing Director, Cameron Lyndon-James, is an experienced entrepreneur and SME Telecommunications industry leader with over 30 years in the industry and will bring that experience to the Vonex team.

The former Young Australian of the Year Finalist said of the acquisition, "Vonex is the most exciting junior listed telco company I've seen emerge in the telecommunications space. I've thoroughly enjoyed watching Vonex achieve its milestones. My staff and I are extremely proud to join the Vonex team and start bringing complementary products and services to Vonex's Channel Partner network."

View Our Investment Portfolios

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why Finfeed.com is Australia’s leading small cap publication

Founded seven years ago, Finfeed.com is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise.

Finfeed.com provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more.

Finfeed.com is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!