Perth-based managed services provider Cirrus Networks is fighting a proposed takeover bid from web hosting and telco services company Webcentral, urging shareholders to reject the plan.
ASX-listed Webcentral announced on Friday that it plans to purchase all of Cirrus’ ASX shares for 3.2 cents each for a total consideration of around $26 million.
Webcentral told Cirrus shareholders in its bidder’s statement that the deal would help them “realise immediate value” as the company had “generally been thinly traded” over the last three months.
“If you accept the Offer, you will eliminate your exposure to the risks and uncertainties inherent in owning [Cirrus Networks] shares,” the document read.
“By contrast, if you do not accept the Offer, the amount which you will be able to realise for your [Cirrus] shares is uncertain.”
Webcentral also said it was the only takeover offer presently available for Cirrus’ shares and represents “a liquidity opportunity” for Cirrus shareholders to sell at the offer price and warns the price will be much lower once the offer closes.
Cirrus has responded to the bid, urging shareholders to reject the offer due to Webcentral not paying an adequate control premium, for being an unsolicited offer, and that the proposed price was not enough.
Cirrus said Webcentral did not pay an adequate control premium, and is offering a “derisory” premium of only 3.2 percent to the last closing price of Cirrus shares of $0.031 and a premium of 11.77 percent and 9.93 percent to the one month and three-month Volume Weighted Average Price (VWAP) of Cirrus shares, being $0.0286 and $0.0291 respectively.
“The premium implied for your shares by the offer price is materially below the average premiums paid in Australian corporate control transactions,” the announcement read.
The company added that Webcentral did not speak to its board on the proposal and suggested that the offer may not have the interests of all Cirrus’ shareholders in mind.
“Webcentral is not offering enough for the benefits it may receive; in the event Webcentral is able to secure 100 percent of Cirrus’ fully paid ordinary shares on issue, Webcentral could likely benefit from meaningful corporate overhead and administrative cost savings which Cirrus directors consider are not reflected in the offer,” Cirrus said.