Atturra (ASX: ATA), a technology and business consultancy firm, is proposing a strategic acquisition of Cirrus Networks Holdings (ASX: CNW), a managed service and information technology solutions provider, in a deal valued at approximately $49.3 million. This article delves into the details of this proposed acquisition, its strategic implications, and what it means for both companies and their shareholders.
The Proposed Acquisition: Key Details
Under the terms of the proposed deal, Cirrus Networks shareholders will receive consideration valued at $0.053 per share, offering a premium of 29.3% over Cirrus’ last closing price and a 25.5% premium based on the 30-day volume-weighted average price. Shareholders will have the flexibility to choose their consideration as either 100% cash, 50% cash and 50% shares, or 100% shares. Those who do not make a choice or submit an invalid election will receive the default consideration of 75% cash and 25% shares.
The maximum total cash consideration payable by Atturra is set at $37.5 million, while the maximum total Atturra share consideration cannot exceed 13.98 million shares.
Board Recommendation and Shareholder Intent
The board of Cirrus Networks has recommended that shareholders vote in favor of the proposed acquisition. Furthermore, each Cirrus director has expressed an intention to vote their shares in favor of the scheme.
Strategic Rationale
Atturra sees the acquisition of Cirrus Networks as a strategic fit that aligns with its goals of expanding its recurring managed services expertise. Cirrus Networks will provide Atturra with a broader geographical presence in the Australian Capital Territory, Western Australia, and Victoria, along with access to a larger government and enterprise customer base. This increased scale will significantly enhance Atturra’s managed services offering, allowing it to deliver highly-recurring, multi-year services to its expanded client base.
Remaining Independent and Sovereign
Both Atturra and Cirrus Networks are among the few remaining independent, locally-owned information and communications technology (ICT) services companies in Australia. The merger of these two companies while maintaining their status as sovereign entities is expected to provide Atturra with a significant competitive advantage.
Complementing Past Acquisitions
This acquisition follows Atturra’s $15 million acquisition of The Somerville Group in March, an Australian managed services provider catering to the corporate and education sectors. The Cirrus acquisition will complement Atturra’s existing portfolio and further its growth strategy.
Transaction Funding
The Cirrus transaction will be funded through a combination of new Atturra shares, a three-year senior debt facility, Atturra’s acquisition facility with Westpac, and existing cash on hand. The funding structure is designed to maintain Atturra’s balance sheet flexibility and enable the pursuit of both organic and inorganic growth opportunities.
Earnings Accretive
The acquisition is expected to be “high single digit earnings per share accretive” for Atturra shareholders in the 2024 financial year on a pro forma and normalised basis. This calculation excludes any one-off transaction or integration costs and is based on a conservative assessment of anticipated synergies.
CEO’s Vision
Stephen Kowal, CEO of Atturra, views the acquisition of Cirrus Networks as a significant step towards realising the company’s vision of becoming Australia’s leading advisory and IT solutions provider. He highlights the strong strategic alignment between the two companies and emphasises how Cirrus’s expertise, particularly in serving government and resources industries, will enhance Atturra’s position as a market leader in these sectors.
Strengthening Atturra’s Position
Atturra’s proposed acquisition of Cirrus Networks signifies the company’s strategic drive to strengthen its presence and capabilities in the ICT services sector. The deal is expected to provide Atturra with valuable assets, expanded geographic reach, and a larger customer base. As both companies move forward, the merger has the potential to shape the future landscape of technology consultancy and managed services in Australia.
