UPDATED: Melbourne IT to acquire Netregistry Group for $50.4m

Company also announces 2013 revenue of $103.4 million

Melbourne IT’s (ASX:MLB) acting CEO Peter Findlay has confirmed that Netregistry Group’s management team and staff will be retained following the $50.4 million acquisition.

Netregistry Group currently employs 130 staff. Founder Larry Bloch will join the Melbourne IT board as a non-executive director.

Speaking on an earnings call today, Findlay said that the quality of the Netregistry Group management team and the work they had done around their technologies was one of the reasons why it decided to acquire the company.

“We are keen to retain that intellectual property [IP] in the business. The Group is a business that mirrors our SMB [small and medium-sized business] operation very closely. It has a retail online business and a reseller business. They’re very strong in Web hosting and email hosting.

“After the structural review last year we talked about becoming a more focused SMB business and we think that this is a strong step in that direction," he said.

Findlay added that the acquisition offers Melbourne IT an “enormous opportunity” to drive cost improvements, increase its product offerings and customer base.

According to an ASX announcement, Netregistry Group’s earnings before interest, depreciation and amortisation (EBITDA) were $6 million.

Findlay said that the acquisition would eliminate product duplication and lead to back office cost savings.

“Cost synergies are estimated at over $5 million by 2015 over and above Netregistry’s existing earnings.”

Turning to Melbourne IT’s 2013 financial results, the company posted a revenue of $103.4 million, down 5 per cent on 2012’s revenue of $108.5 million.

EBITDA was $5.8 million, down 43 per cent on 2012’s EBITDA of $10.2 million.

“Underlying revenue for the second half of 2013 was steady on the first half while the cost structure in the second half of 2013 was significantly higher than the current structure due to restructuring costs,” Findlay said.

According to Melbourne IT, cost saving initiatives are expected to deliver savings of $4 million in 2014.

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