Pay TV operator Austar has bailed-out cash-strapped eisa, offering to take the helm and mop up all of the ISP's ordinary shares which have an equity value of AU$24.4 million.
Austar United Communications' offer of 20 cents for each eisa ordinary share will cover 80.1 percent of the ISP's total shares. The further 19.9 percent, Austar is set to acquire from Johnson Wang's company KTX European Holdings -- the 57.1 percent majority shareholder in eisa -- for a total consideration of just AU$1, in order to maximise the return for the majority of shareholders.
Under the terms of the agreement, and on the off-chance that eisa recovers the cash deposit of AU$20 million paid to UUNet in relation to the OzEmail acquisition, Austar will increase its offer accordingly. Austar Head of Corportate Affairs Bruce Meagher told ZDNet Australia: "Austar will remit that money on a pro rata basis to shareholders."
"The board has accepted that this is the best offer for all shareholders in the absence of a higher offer," Meagher added, however, eisa acting Chairman Evan Rees admitted the deal was "not a good result for shareholders".
Following a February high of AU$3.18 eisa stock suffered a 30 percent downfall in market value on April 30 -- just day's after Fairfax holding's Internet arm f2 pulled the plug on its AU$40 million funding of eisa's OzEmail acquisition. eisa has since lost further credibility and stock valued at a mere 25 cents has been suspended from trade since June 6. Trading in the embattled stock commenced again as of 11.00am today. By early afternoon trade a 16 percent slide had taken its share price down to Austar's offer price of 20 cents.
Rees said that eisa is caught up in "artificially soft" Internet equity transactions that have hit the market. Although Rees believes the Austar offer to be "the best all-round solution" at present, he said eisa would not rule out the possibility of considering other offers, if they were to arise.
eisa is an attractive takeover target for Austar for a number of reasons. It's an attempt to bundle payTV with Internet services, where Austar believes eisa's subscriber base of 85,000 will give it a foothold in the sector. Furthermore, a substantial proportion of eisa's subscriber base is in Austar's target zone of regional Australia making the ISP an even better buy for the payTV provider. Austar also sees eisa as the perfect platform from which to launch into capital cities.
In the interim of the deal's completion, Austar has bolstered the beleaguered ISP with a AU$7.5 million short-term loan to keep it from hitting rock bottom and to "ensure that eisa customers continue to receive all of their services during the takeover period," Austar CEO John Porter said.
If eisa defaults on the loan, or if the transaction fails to go ahead and eisa cannot raise the funds to repay the loan, Austar has secured rights to eisa's assets, namely its three businesses in Cairns, Darwin and Canberra.
Austar's Porter said it was "premature" to say whether eisa CEO Damien Brady would have a position in the new company, although he did confirm a post press conference meeting was scheduled to discuss the transition of staff into the Austar business.
