Comms Group Targets $75M Revenue with $10M TasmaNet Acquisition

• Acquisition of TasmaNet and select Field Solutions assets for $10 million
• Proforma FY25 revenue target raised to ~$75 million with underlying EBITDA of $9-10 million
• Capital raise of $7 million via placement and entitlement offer at $0.05 per share
• Funding supported by $10.7 million debt facility from Regal Funds Management
• Acquisition expands Comms Group’s presence in Tasmania and enhances managed IT and cloud services

Strategic Acquisition Amid Industry Reshuffle

Comms Group Limited (ASX: CCG) has unveiled a transformational acquisition of TasmaNet and select assets from Field Solutions Holdings Limited (ASX: FSG), which entered voluntary administration earlier this year. The $10 million deal, expected to complete by the end of May 2025, is set to significantly expand Comms Group’s footprint, particularly in Tasmania, and bolster its cloud communications and managed IT services portfolio.

TasmaNet, a leading Tasmanian provider of premium data communication services, brings a robust customer base of over 600 government and business clients, including longstanding contracts with 29 Tasmanian government departments. Its unique fixed wireless network covering approximately 85% of Tasmania’s population and fibre infrastructure in Hobart represent valuable assets with growth potential.

Financial Upside and Funding Structure

The acquisition is expected to add approximately $19 million in annualised revenue and $4 million in EBITDA, representing a 34% and 72% uplift respectively on Comms Group’s standalone FY25 guidance. The combined proforma group targets revenue of around $75 million with underlying EBITDA between $9 million and $10 million, underpinned by a recurring revenue base exceeding 90%.

To fund the acquisition and associated costs, Comms Group is raising $7 million through a mix of a $4.8 million placement and a $2.2 million underwritten entitlement offer priced at $0.05 per share, reflecting a discount to recent trading prices. Complementing this equity raise is a $10.7 million debt facility provided by Regal Funds Management, which includes $4 million for the acquisition and $6.7 million to refinance existing debt.

Strategic Rationale and Market Expansion

This acquisition strategically enhances Comms Group’s scale and service capabilities, particularly in managed IT and private cloud services. It opens new market segments in Tasmania, including mining and aquaculture sectors, and extends Comms Group’s reach beyond its existing operations in Victoria, New South Wales, and Queensland.

In addition, TasmaNet’s entrenched relationships with blue-chip government customers and a strong corporate client base provide high barriers to entry for competitors and immediate access to new revenue streams. The deal also aligns with Comms Group’s ongoing M&A strategy aimed at consolidating its position as a leading cloud communications and secure workplace solutions provider across the Asia-Pacific region.

Risks and Integration Challenges

While the acquisition promises significant upside, Comms Group acknowledges inherent risks. These include integration complexities, potential undisclosed liabilities due to the purchase from receivership, and the need to satisfy various conditions precedent before completion. The absence of typical warranties and indemnities in the sale agreement adds a layer of uncertainty.

Additionally, cultural and contractual differences with TasmaNet’s existing employees may pose retention challenges. Comms Group’s management will need to carefully navigate these to realise anticipated synergies and maintain operational continuity.

Outlook and Next Steps

Comms Group is targeting a strong EBITDA to free cash flow conversion, supported by a capex-light business model. The company expects to leverage its expanded scale to improve pricing power and market capabilities. Active discussions on further M&A opportunities remain ongoing, signaling a continued growth trajectory.

The capital raising timetable is set to commence with the entitlement offer opening around 22 May 2025, with completion anticipated by early June. Investors will be watching closely for successful integration and the realisation of financial targets in the coming months.

Bottom Line?

Comms Group’s acquisition of TasmaNet marks a pivotal step in its growth strategy, but successful integration and risk management will be critical to unlocking its full potential.

Questions in the middle?

• Will Comms Group successfully integrate TasmaNet’s operations and retain key personnel?
• How will the acquisition impact Comms Group’s cash flow and debt servicing in the near term?
• What are the prospects for further M&A activity following this transformational deal?