Back on the trading floor after more than two weeks of suspension, eisa shareholders reacted quietly to yesterday's news that Austar United Communications intends to acquire the struggling ISP in a $24.4 million takeover bid.
Re-listing on the ASX at 20 cents, 4.5 cents below the price of the shares when the trading halt was called, eisa stock fluctuated only slightly throughout the day, closing at 21 cents. More than 6 million shares were traded.
Austar United Communications announced yesterday morning that it plans to acquire no less than 90 per cent of eisa stock in what many investors will see as a rescue-mission takeover bid.
Eisa's board of directors and executives have already moved to recommend shareholders accept the offer, which will not actually reach investors' hands for another four weeks. The directors also indicated that they intend to accept the offer in the absence of a higher offer.
Eisa has been struggling to maintain shareholder confidence since the collapse of its proposed acquisition of UUNet's consumer internet arm, OzEmail, and subsequent partnership deals. At a recent shareholder meeting, executives admitted the company was up for sale.
Under the deal, which values eisa at $24.4 million, Austar will offer $0.20 cash for each ordinary share of eisa as well as provide the ISP with a $7.5 million short-term loan.
The loan is intended to provide working capital to eisa to enable the ISP to continue offering services to subscribers during the period of the offer, said Bruce Meagher, head of corporate affairs, Austar United Communications.
According to officials, the loan will either be repaid to Austar in cash or eisa will sell its Cairns, Darwin and Canberra businesses to Austar under a Business Sales Option Agreement.
Meagher said the acquisition of eisa will provide a number of value propositions to Austar, including access to 27 of eisa's 48 points of presence on its existing network and the addition of 85,000 new internet subscribers.
Austar currently only has around 10,000 internet subscribers, the majority of whom were acquired through purchasing two ISPs in the Gold Coast and Cairns, Meagher said.
Austar is currently rolling out its regional network to provide internet services, and will be able to use eisa's points of presence to expand the network, both regionally and in capital cities, Meagher said.
" We have always been interested in capital city markets -- ideally for broadband," he said.
"With eisa we will have an existing narrowband internet base to give us the opportunity to move people into broadband."
Meagher said opportunities will exist to "upsell" narrowband customers to broadband services provided by Chello.
Under the agreement announced yesterday, Austar has already purchased a 19.9 per cent stake in eisa through a deal with KTX European Holdings, a company associated with Johnson Wang, the owner of collapsed reseller Edge Technology. Austar paid $1.00 for the 19.9 stake.
Eisa did not return IDG's phone calls.