Satellite services provider NewSat (ASX: NWT) has been hit with a takeover offer from EWC Payments, a company founded and run by Matthew Starr, who was involved with NewSat in 2003 but split over disagreements with NewSat founder Adrian Ballintine over the direction the company should take.
EWC is offering one EWC share for every 25 NewSat shares and one EWC option for every 29 NewSat options. According to Starr, "With the nominal value of EWC shares at $0.20 per share, this values NewSat at approximately $50m, which is a significant premium of approximately 35 percent over the current market capitalisation of approximately $37m at the closing price of $0.0006 per share on 02 September."
EWC however is not a listed company and Starr has given no indication of how he has arrived at this "nominal" value of $0.20. for EWC shares.
He claims that, if his takeover offer is successful, NewSat would continue to trade as NewSat and would continue its existing satellite businesses to which would be added EWC's existing businesses, namely: credit card processing and POS device deployment, international money remittance, Quilite sound abatement technology and diamond and gold mining concessions in the Republic of Guinea.
Starr, in a letter to Ballintine, said he had previously attempted a reverse merger with NewSat (then Multiemedia) in 2003 "However you changed your business focus and adopted a 'satellite only' business strategy to the enormous disadvantage of NewSat shareholders."
Starr then claims to have independently "established a private company business model exactly like that proposed to Multiemedia in 2003," and to have achieved "turnover figures that have totally dwarfed NewSat's woeful revenue and profit figures. He claims EWC revenues were $170m in 2007 and $474m in 2008.
iTWire was unable to discover much about EWC. When we checked out "EWC Payments" on Google most of the 49 references we came up with were allegations of wrongdoing on sites dealing with credit card scams, frauds and complaints, and the company does not appear to have a web site. The related sound insulation company does have a very basic website but the only contact option is to email the company.
NewSat has just reported its results for FY09, greatly improving its performance over FY08. It lifted revenues by 46 percent to $19.9m, reduced EBITDA loss from $6.9m to $0.99m and reduced net loss after tax from $8.1m to 3.0m.
The company said it had increased its annuity revenue streams significantly during the first half of the financial year and continued to add new business contracts during the second half of the year whilst minimising contract churn.
It said it had leveraged off the engineering facilities at its two earth stations in Perth and Adelaide and global sales resource to gain oil, mining and gas contract revenues both through wholesale and direct retail channels. "Significant contract growth was both within domestic and offshore remote regions with 100 percent of the business growth from corporate contracts."
NewSat finished the year with $1.9 million cash and no debt at 30 June 2009. It says it expects to achieve its first positive EBITDA in FY10, claiming that its cost structure is fixed and containable while contracted recurring revenues are growing strongly.
NWT Price at posting:
0.7¢ Sentiment: None Disclosure: Held
