Freedom4 has conditionally agreed to acquire telecoms reseller Daisy Communications and web hosting and network services provider Vialtus ahead of a proposed share placing on AIM to raise £83m.
The deal revealed by MicroScope yesterday is part of a buy and build strategy and the word on the street is that Freedom4, which will rebrand the operations as Daisy Group, is looking to acquire Eurotel and others.
Under the agreement, Freedom4 will fork out £30m in cash to buy the entire share capital of Daisy and the issue to Daisy Vendor and Optionholders of 63,750,000 Consolidated Ordinary Shares, valued at £51m at the placing price.
It paid £13m in cash for Vialtus and will issue 36,250,000 shares that it expects to be valued at £29m. Freedom4 sold Vialtus - trading as Host Europe - for £120m in April 2008 to Oakley Capital Ltd.
The flotation on AIM is expected to generate £83m to fund both acquisitions and future expansion, Freedom4 revealed.
"We are seeing an opportunity in the UK telecoms services market at the moment where the fragmented nature and depressed valuations in the sector create conditions which are well-suited for generating value through consolidation," said Peter Dubens, non-exec chairman at Freedom4 Group.
Dubens is also a director at Oakley Capital but was not involved in the decisions of Freedom4 in relation to the Vialtus acquisition, the company said, adding an independent committee of the board had considered this.
Over the last eight years, Daisy has acquired 24 businesses and has over 30,000 customers that use its fixed line, mobile and broadband services.
Matthew Riley, CEO at Daisy, who will head up the combined organisations, said this had enabled it to hone "consolidation and integration skills".
He added that Daisy and Vialtus will continue to target small and mid-sized customers, "and provide us with the solid foundations for our plans for future growth".
The market capitalisation of the combined businesses is expected to be around £204.4m.