Fixed wireless broadband operator BigAir (ASX:BGL) has arranged to acquire Queensland-based WiMAX provider Allegro for up to $10.5 million.
The cash-and-stock deal will see Allegro become a wholly-owned subsidiary of BigAir. Allegro's current managing director will stay on board after the deal closes. The merger is expected to close at the start of June.
Allegro was founded in 2005, and built Australia's first certified WiMAX network using 3.5GHz spectrum acquired in 2006.
The company provides services for small, medium and large businesses, as well as tertiary student accommodations – Allegro currently services around 60 sites that contain some 8,000 student beds
BigAir CEO Paul Tyler said that after Allegro is merged with BigAir's own student accommodation division, the company will be serving around 27,000 beds across 124 sites.
He said Allegro is expected to generate between $5 million and $6 million in revenue for BigAir in FY13, and eventually deliver $2 million in annualised ebitda.
“The acquisition is expected to deliver significant cost, revenue and capital expenditure synergies,” Tyler said.
The deal, which still requires due diligence and other approvals, will involve a $7.5 million payout on completion, comprising 50:50 of cash and stock.
BigAir will also pay up to $3 million within 30 days of the publication of Allegro's FY13 accounts, with the final sum to be based on revenue earned. This earn-out is contingent on student revenue exceeding $2.2 million, or non-student revenue topping $3.3 million.
BigAir also revealed that its underlying ebitda was around $900,000 for the month of April, representing an annualised run rate of $10.8 million – up 100% compared to FY11.
As result of these figures, BigAir now expects to exceed its previous forecast of an underlying ebitda of $9 million for FY12. But the company did not give a detailed prediction, stating that the impact of the Allegro acquisition on the results must first be assessed.
BGL shares were trading 8.57% higher at $0.380 as of 3:30pm on Tuesday, the day the deal was announced.