A hostile takeover of local IT services firm Cirrus Networks has escalated, after its Victorian bidder alleged the target made a number of inaccurate statements that could mislead shareholders.
A hostile takeover of local IT services firm Cirrus Networks has escalated, after Melbourne-based Webcentral Group alleged the target made a number of inaccurate statements that could mislead shareholders.
Today, Webcentral – which has about an 18 per cent shareholding in Cirrus – claimed the target had made a number of inaccurate statements in recent announcements, including in a letter on October 4 that called on shareholders to “stop the theft” of the Perth-based company.
Webcentral is seeking to acquire the remainder of Cirrus’ issued capital for 3.2 cents a share, a move that values the target at less than $30 million.
Cirrus, whose board includes director Paul Everingham, has repeatedly claimed the offer is unfair and unreasonable since it’s a small premium to the company’s closing price on July 29 – the day before Webcentral submitted its proposal – and less than a recent valuation of Cirrus.
Its letter to shareholders reiterated those claims and called on them to vote against resolutions made by Webcentral, which included the removal of all Cirrus' elected directors except Mr Everingham.
Webcentral is hoping to replace the directors with two of its own nominees, managing director Joe Demase and company secretary Michael Wilton.
But Mr Everingham has threatened to leave the Cirrus board if shareholders vote in favour of the resolutions at a requisition meeting scheduled for October 15.
In response to Cirrus’ letter to shareholders, Webcentral disputed a number of claims, including that it did "not have the best interests of Cirrus shareholders in mind” and that it had made “multiple factually inaccurate statements designed to mislead and manipulate shareholders”.
“Webcentral, as the largest shareholder in Cirrus, has the same interest as other shareholders in restoring Cirrus to an appropriate level of profitability,” it said.
“Webcentral has made a substantial investment in Cirrus and considers itself a long-term investor. [It] does not consider its statements to be misleading.”
The company also doubted Cirrus was in discussions with various counterparties about other potential takeovers.
“It seems the board has made little headway to date as no rival bidder has emerged,” Webcentral said.
“Despite disclosing these discussions, the incumbent board has failed to update its shareholders on the objectives of those discussions or the outcome or tenor of those discussions.
“It is fair to conclude that the board has been unable to elicit any outcome for shareholders which is superior to the Webcentral takeover bid."
The company claimed the market didn't share the Cirrus board's view on value, since the target's shares remained trading at 3.2 cents, the same as Webcentral's offer price.
Webcentral also said statements made by Cirrus could mislead or distract shareholders at the upcoming meeting if not 'corrected'.
“The real issues are replacing tired and underperforming Cirrus board members with executives backed by Webcentral with experience and a record of accomplishment of turning around underperforming businesses,” Webcentral said.
The company has made a number of acquisitions in recent years, including that of 5G Networks in October 2020.
Cirrus’ last acquisition was in 2017, when the company purchased Canberra-based IT services provider Correct Communications.
Earlier this month, Christopher McLaughlin was permanently appointed chief executive and managing director of Cirrus, replacing Matthew Sullivan who stepped down from the roles and as a director. It came after Mr Sullivan took a leave of absence in mid-September for "personal and family reasons".
Shares in Cirrus remain unchanged since Monday, trading at 3.2 cents.
Webcentral’s shares were up 4 per cent at 1:55pm AEDT to trade at 52 cents.
