Amcom Telecommunications has sold 4.5 million of its shares in internet service provider iiNet, and says it will distribute its remaining 31 million iiNet shares to its shareholders on a pro-rata basis.
Amcom said the sale of the 4.5 million shares would leave the company with no net debt and would provide the working capital necessary to enter the cloud computing market.
Shareholders will also receive one iiNet share for every 23.2 Amcom shares held under the proposed distribution plan, which will be put to Amcom shareholders at a general meeting in August.
Amcom said its board believed the "in specie distribution" would be tax neutral for shareholders but was seeking a ruling from the Australian Taxation Office.
Separately, the board also proposed a three-to-one share consolidation that would reduce the 721 million Amcom shares on issue to 240 million.
Amcom chief executive Clive Stein said the company was now strategically placed to leverage the emerging telecommunications and IT markets.
“The recently announced partnership with Dimension Data unit, BlueFire Corporation reinforces the strategic direction of the business in the emerging hosted cloud market,” Mr Stein said.”
Mr Stein said the Amcom board believed iiNet was a quality business, but it and Amcom serviced different sections of the telecommunications market and implemented different growth strategies.
“For those reasons, we believe Amcom shareholders should be allowed to choose their own mix of exposure to the consumer and enterprise markets and both businesses would benefit by moving forward independently of each other,” he said.
Amcom acquired the majority of its 23.4 per cent stake in iiNet in 2006 at an average cash entry price of $1.14 per share.
Amcom’s shares gained 1.5 cents today, to trade at 37 cents, while iiNet gained 2 cents, to close at $2.85.
