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ASX/MEDIA RELEASE
COMMANDER BID IGNORES STRATEGIC VALUE
Directors strongly recommend shareholders reject the Offer
SYDNEY 25 January 2006: The Board of Volante Group Limited (“Volante”) said in its
Target’s Statement released today that the $1.01 cash per share Takeover Offer
(“Offer”) by Commander Communications Limited (“Commander”) subsidiary
Commander Corporation Pty Limited should be rejected, as it fails to recognise the
strategic value of Volante’s strong competitive position in the high-end Managed IT
Services sector and the company’s improving outlook.
An Independent Expert’s Report included in the Target’s Statement, prepared by Lonergan
Edwards & Associates Limited, valued Volante’s shares at between $1.27 and $1.44 each or
between 26 per cent and 43 per cent more than the $1.01 per share being offered by
Commander. Lonergan Edwards found Commander’s Offer to be neither fair nor
reasonable.
Volante Chairman, Robin Crawford, said Volante directors unanimously and strongly
recommended that shareholders reject Commander’s absurdly low Offer.
“The implied multiple of the bid is well below IT sector historic transaction and forecast
trading multiples and represents an unusually low premium, negative in some cases, to pre-
offer trading prices.
“As well, the Commander offer doesn’t reflect either the strategic value of Volante’s strong
competitive position in the high-end Managed IT Services sector, the value of that to
Commander, or the company’s improving outlook.
Mr Crawford said the Group was forecasting significant revenue and earnings growth in
FY 2007.
“Services revenue is forecast to grow by close to 50 per cent from $103.9 million in FY 2005
to $155.7 million in FY 2007. Group EBITDA is expected to grow at a compound annual
growth rate of 12.0 per cent per annum with NPAT growing 15.6 per cent per annum
between FY 2005 and FY 2007.
“In light of all of these factors, Volante directors, who collectively own just under four per cent
of Volante shares on issue, do not intend to accept the $1.01 Offer from Commander for any
of these holdings,” Mr Crawford said.
Volante Group Managing Director and CEO, Ian Penman, said: “Volante is now a very
attractive business, with a high degree of strategic value. This value is not recognised in
Commander’s offer. Following substantial investment and corporate restructuring and a significant improvement in customer satisfaction, Commander is obviously trying to buy
Volante ‘on the cheap’.
“The Managed Services market is a ‘tough nut to crack’. With a lot of hard work and
expense, Volante is now a strong competitor in this high value market. This is most recently
evidenced by last week’s announcement regarding our selection as a preferred tenderer on
the South Australian Government’s extensive server fleet maintenance and support services
contract,” Mr Penman said.
The Independent Expert has concluded that almost 80 per cent of Volante’s value relates to
the Services business while the Product Solutions business contributes only 20 per cent.
Five years ago, the Product Solutions business accounted for the lion’s share of earnings.
The earnings and trading multiples reflected in Commander’s Offer are unrealistically low
and ignore Volante’s growing and sustainable earnings profile.
Looking forward, Mr Penman said that Volante was on the cusp of a strong and sustainable
earnings uplift, based on the benefits of cost management initiatives, improvements in
systems and processes, and increased revenues from long-term Managed IT Services
contracts with both major private and public enterprises.
“Volante is well placed to generate additional earnings from existing Managed IT Services
contracts and to add to its portfolio through new tenders.
“Managed IT Services (our core business focus) involve long-term contracts that deliver
recurring revenues and additional earnings streams from each client. We have typically seen
15–20 per cent uplift, in added service contract value, within 12 months of commencing a
Managed Services contract.
“We have been successful in winning new contracts, thanks to the committed and
experienced team we have assembled. At the same time we also have an excellent client
retention record, which augurs well for the future.
“While now a much smaller contributor to earnings than in the past, Volante is also expecting
an improvement from its Product Solutions business in FY 2007. This is primarily a result of
cost saving initiatives and a new on-line customer procurement system (to be implemented
by June 2006).
“The combined effect of our increasing exposure to Managed IT Services and the initiatives
in our Products Solutions business are reflected in the forecasts in the Target’s Statement,”
Mr Penman said.
END
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