Macquarie Telecom's battle to buy Bulletproof is getting increasingly nasty as the company accused Bulletproof's board of being "misleading", "deceptive", "unbalanced" and "one-sided" in encouraging shareholders to reject its $18 million acquisition offer.
Bulletproof's board in December advised shareholders to reject a proposed 100 percent takeover by Macquarie Telecom valued at 11 cents per share, after an independent expert appointed by Bulletproof to review the offer determined that it was "not fair and not reasonable".
In a statement signed by Macquarie Cloud Services director David Tudehope, MacTel has now outlined line by line why it believes Bulletproof is misleading shareholders.
While Bulletproof independent board committee directors have assured their belief in the fundamental strength of the Bulletproof business, Macquarie Telecom counters that "Bulletproof's financial position is fundamentally weak".
MacTel said it was inaccurate to say Bulletproof had “turned around”.
"The business continues to incur losses and will require more capital from shareholders to implement the 'turnaround', which may or may not be successful."
It pointed out that Bulletproof had twice missed its guidance in 2017, that profits had some from one-off reseller deals not from annuity-based revenue, and that it was poor at converting earnings to actual cash.
"Bulletproof’s FY18 budget targets and outlook depends on a significant improvement in business performance up to 30 June 2018. It is not evident how the improved performance will be achieved and whether it will be sufficient to avoid a capital raising."
MacTel's statement continued: "There is no reasonable basis to suggest that the Bulletproof business has already or will imminently become profitable following a series of losses.
"To suggest that the business has been restructured and turned around is also misleading given that recruitment of new key personnel is still to be completed and there is no evidence that the changes so far have resulted in an increase in revenue.
"The turnaround depends on recruiting new management, identifying new business, securing that business and preventing existing customers from leaving. There is a considerable risk that some or all of this will not be achieved."
Some of the departures in the past year included Bulletproof co-founder Lorenzo Modesto, chief operating officer Mark Rainbird, and redundancies for 30 full-time positions cut as it resized its engineering teams.
Macquarie Telecom also refutes Bulletproof's claim to shareholders that the independent board committee directors unanimously recommended investors reject the offer.
"The board has not unanimously rejected the offer. The target’s statement includes the views of only two of the three Bulletproof directors. The contrary views of the co-founder, executive director and largest Bulletproof shareholder, Mr Anthony Woodward, have been omitted," Macquarie Telecom wrote.
Bulletproof had also told shareholders that “the offer is opportunistic, inadequate” and "reflects a historical low".
MacTel hit back at this claim, saying that the offer was as a result of the Bulletproof board deciding to put the company up for sale in early 2017 as a result of its deteriorating financial performance.
"As part of this process, Macquarie Telecom and a number of other companies were invited by Bulletproof’s chairman, Mr Farrow, to conduct due diligence and consider submitting an offer to buy Bulletproof. To date, Macquarie Telecom is the only party to have submitted an offer capable of acceptance," MacTel wrote.
Other parties are also understood to be considering a bid for Bulletproof, including Sydney IT solution provider AC3, which has publicly said it would pay 15.2 cents per share for Bulletproof – valuing the company at $24.7 million, which is more than $5 million higher than MacTel's original offer.
MacTel also argued that its offer of 11 cents per share does not reflect a historical low, pointing out that Bulletproof had traded at lower rates on four trading days.