The Uniti Group Ltd (ASX: UWL) share price has returned from its trading halt and is zooming higher.
At the time of writing, the telco’s shares are up a sizeable 13% to $1.67.
Why was the Uniti share price in a trading halt?
Uniti requested a trading halt on Wednesday so that it could undertake an equity raising to fund the acquisition of the Telstra Velocity and South Brisbane Exchange assets from telco giant Telstra Corporation Ltd (ASX: TLS).
According to the release, the two parties have agreed a fee of $140 million for the assets, with $85 million payable upon completion.
The remaining $55 million is deferred, with $20 million payable over 3 years and $35 million due following the completion of the migration of the assets and services. Though, the deal includes the ability to adjust the total purchase price subject to the size of the customer base at the time of migration.
Equity raising.
This morning Uniti announced the successful completion of its fully underwritten institutional placement.
The company raised $50 million through the issue of approximately 33.3 million shares at a price of $1.50 per new share. This represents a 1.4% premium to Uniti’s last close share price.
Management notes that the compelling strategic rationale for the acquisition of the Telstra Velocity assets has meant that the placement achieved an exceptional result of being priced at a premium.
In fact, the placement was several times oversubscribed at the placement price, with applications for placement shares received from more than 40 institutional funds.
It’s not hard to see why it was so popular. Management is forecasting the new assets to contribute $21 million in annual earnings before interest, tax, depreciation and amortisation (EBITDA), starting early January 2021.
Uniti will now push ahead with its share purchase plan, which is aiming to raise a further $10 million. This is being undertaken at the lesser of the placement price or a 2% discount to its five-day volume weight average price on 20 January.
Uniti Chairman, Graeme Barclay, commented: “We are again delighted by the strong support from our institutional shareholders. The high level of demand for placement shares priced at a premium is an endorsement of the transaction’s economics and compelling strategic rationale to expand Uniti’s core fibre infrastructure network through the acquisition of the Telstra Velocity assets.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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