GX Networks plc, the telecoms network operator and provider of business broadband solutions, has agreed to acquire Pipex for a total consideration of approximately £55 million and has effected a successful institutional Placing raising approximately £27.7 million, both are subject to approval of Shareholders at an EGM which has been convened for 27 October 2003. Following completion of the Acquisition GX Networks will be renamed Pipex Communications plc to leverage fully the Pipex brand.
The Pipex brand has a twelve-year track record and is widely recognised in the UK. As at the end of June 2003 Pipex had about 6 per cent of the total UK ADSL market and approximately over 10 per cent market share of non-BT plc owned ADSL lines. Pipex provides a portfolio of ISP services to its 119,000 strong customer base consisting of small corporates, SMEs and residential customers.
Pipex has been profitable and cash generative under its managing director David Rickards, whose family owns 100 per cent of its shares. During the year ended 31 May 2003 the turnover of Pipex was approximately £31.6 million, EBITDA was £9.9 million and pre-tax profits were £10.1 million. As of today Pipex has approximately £20 million of cash in the bank.
Pursuant to the Acquisition Agreement, the Rickards family has agreed to sell and GX has agreed to purchase, subject to certain conditions, the entire issued share capital of Pipex. The approximately £55 million consideration payable for the shares of Pipex will be satisfied by the allotment of £5 million Consideration Shares to the vendors and the payment of approximately £50 million in cash on completion.
It is intended that the cash consideration is to be financed through a new debt facility of approximately £15 million, the Placing, and approximately £10 million from the existing cash resources of the enlarged Group subject to a financial assistance whitewash under sections 151 to 158 of the Companies Act 1985 to be effected prior to completion of the Acquisition.
In addition to the acquisition of Pipex, GX Networks has raised £27.7 million by way of a placing with institutional and other investors, underwritten by Collins Stewart Limited, of 443,200,000 shares at a placing price of 6.25p. It is expected that the New Ordinary Shares the subject of such placing will be admitted to trading on the Alternative Investment Market on 28 October 2003. The proceeds of the Placing will be used to fund part of the acquisition purchase consideration.
GX Networks has acquired three companies since the acquisition of Transigent in October 2002. The acquisitions have been completed against the backdrop of consolidations in the alternative telecommunication providers market which the Company expects to continue throughout the remainder of 2003 and into 2004. These acquisitions have also given GX Networks an enlarged product portfolio across access, hosting security, VPN's, voice services and an enhanced customer base. Following this transaction GX Networks will have a customer base of over 140,000 up from 600 in October 2002. GX Networks believes it is now well positioned to further develop its business through both acquisition and organic growth.
Mike Read, Chief Executive Officer of GX Networks, said: "This acquisition represents a tremendous milestone in the development of our business. The Pipex brand has an excellent reputation and, with a 12-year track record of business success, is an ISP that is well positioned for future growth. The synergies between the two companies are expected to deliver excellent benefits to our existing and future customers in both residential and business markets."
It is proposed that David Rickards will join the Board in an executive capacity on completion of the Acquisition. David Rickards is a highly successful entrepreneur with a strong background in business processes and accounting.
David Rickards, Managing Director of Pipex said: "I am excited about this deal with GX Networks, particularly because of the added benefits it will bring to our customers. By giving them access to the wider range of services available through GX Networks' extensive product portfolio, it will allow them to meet all their communications needs through one well established independent provider."
The Pipex brand has a twelve-year track record and is widely recognised in the UK. As at the end of June 2003 Pipex had about 6 per cent of the total UK ADSL market and approximately over 10 per cent market share of non-BT plc owned ADSL lines. Pipex provides a portfolio of ISP services to its 119,000 strong customer base consisting of small corporates, SMEs and residential customers.
Pipex has been profitable and cash generative under its managing director David Rickards, whose family owns 100 per cent of its shares. During the year ended 31 May 2003 the turnover of Pipex was approximately £31.6 million, EBITDA was £9.9 million and pre-tax profits were £10.1 million. As of today Pipex has approximately £20 million of cash in the bank.
Pursuant to the Acquisition Agreement, the Rickards family has agreed to sell and GX has agreed to purchase, subject to certain conditions, the entire issued share capital of Pipex. The approximately £55 million consideration payable for the shares of Pipex will be satisfied by the allotment of £5 million Consideration Shares to the vendors and the payment of approximately £50 million in cash on completion.
It is intended that the cash consideration is to be financed through a new debt facility of approximately £15 million, the Placing, and approximately £10 million from the existing cash resources of the enlarged Group subject to a financial assistance whitewash under sections 151 to 158 of the Companies Act 1985 to be effected prior to completion of the Acquisition.
In addition to the acquisition of Pipex, GX Networks has raised £27.7 million by way of a placing with institutional and other investors, underwritten by Collins Stewart Limited, of 443,200,000 shares at a placing price of 6.25p. It is expected that the New Ordinary Shares the subject of such placing will be admitted to trading on the Alternative Investment Market on 28 October 2003. The proceeds of the Placing will be used to fund part of the acquisition purchase consideration.
GX Networks has acquired three companies since the acquisition of Transigent in October 2002. The acquisitions have been completed against the backdrop of consolidations in the alternative telecommunication providers market which the Company expects to continue throughout the remainder of 2003 and into 2004. These acquisitions have also given GX Networks an enlarged product portfolio across access, hosting security, VPN's, voice services and an enhanced customer base. Following this transaction GX Networks will have a customer base of over 140,000 up from 600 in October 2002. GX Networks believes it is now well positioned to further develop its business through both acquisition and organic growth.
Mike Read, Chief Executive Officer of GX Networks, said: "This acquisition represents a tremendous milestone in the development of our business. The Pipex brand has an excellent reputation and, with a 12-year track record of business success, is an ISP that is well positioned for future growth. The synergies between the two companies are expected to deliver excellent benefits to our existing and future customers in both residential and business markets."
It is proposed that David Rickards will join the Board in an executive capacity on completion of the Acquisition. David Rickards is a highly successful entrepreneur with a strong background in business processes and accounting.
David Rickards, Managing Director of Pipex said: "I am excited about this deal with GX Networks, particularly because of the added benefits it will bring to our customers. By giving them access to the wider range of services available through GX Networks' extensive product portfolio, it will allow them to meet all their communications needs through one well established independent provider."
