Lifestyle tech company, CellNet (ASX: CLT), has found a potential saviour amidst its mounting losses. In a bid to transform its fortunes, CellNet has announced its proposal to be acquired by Wentronic, a leading manufacturer and distributor of consumer electronics accessories. The acquisition, valued at $6.6 million, comes at a crucial time for CellNet as it grapples with financial challenges.
The Company has entered into a Scheme Implementation Deed with Wentronic. The agreement says that Wentronic will acquire all outstanding shares of CellNet not currently owned by Wentronic and its associates through a scheme of arrangement.
Wentronic, a privately held company headquartered in Braunschweig, Germany, with offices in Hong Kong, Shenzhen, and Ningbo, has been a major shareholder in CellNet since 2017, holding approximately 53.2% of the company’s shares. Known for its global presence and servicing over 2,600 international customers, Wentronic specialises in manufacturing and distributing consumer electronics accessories.
Wentronic’s CEO and Managing Director, Michael Wendt, stated “We believe that the acquisition of CellNet will benefit both the business and CellNet’s customers, suppliers, employees and other stakeholders through Wentronic’s commitment to the market, greater financial stability and scale, and better integration with our global business.
“The proposed 2.7c per share cash scheme consideration is a significant premium to the current share price, provides certainty of value and represents a compelling price having regard to market conditions, CellNet’s recent financial performance and the future capital requirements of the business.”
CellNet’s financial performance in the first half of the fiscal year 2023 has been less than favourable, with an EBITDA loss of $429K, marking a significant increase of approximately 200% compared to the same period in the previous fiscal year. The decline in top-line sales by $4,574,000 or 10.5% can be attributed to ongoing challenges in the retail environment and inflationary pressures.
Under the proposed scheme, if implemented, CellNet shareholders (excluding Wentronic Shareholders) will be entitled to receive 2.7 cents per share in cash. This implies an equity value of approximately $6.6 million based on full ownership. The offer represents a 50% premium over CellNet’s closing share price of 1.8 cents on May 10, 2023, a 50% premium over the 30-day volume-weighted average share price, and a 15% premium over the 90-day volume-weighted average share price.
Even so, this offer stands in stark contrast to CellNet’s five-year high of 42.47 cents per share, which was reached in October 2018.
An Independent Board Committee (IBC) has been formed by CellNet to evaluate Wentronic’s proposal. The IBC, consisting of the company’s two independent directors, Tony Pearson and Giles Karhan, has unanimously recommended that CellNet shareholders vote in favour of the scheme.
CellNet’s Chair, Tony Pearson, added, “’The SID announced today provides CellNet shareholders with an opportunity to realise an attractive cash amount of 2.7c per share, reflecting a compelling 50% premium over the current market value of CellNet shares. The SID provides certainty for CellNet shareholders in the context of an uncertain economic outlook.”
Both CellNet and Wentronic have agreed to reciprocal break fees of $250,000 payable under specific circumstances.
The Scheme Meeting itself is expected to be held in early August 2023, providing CellNet shareholders with an opportunity to express their opinions and cast their votes.
Alinda is a Business Reporter for The Sentiment
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