Leading Web Service Company Web Central which is run by former publisher Sean Howard and Former Sydney Mayor Lucy Turnbull has been sold.
News that domain name registrar Melbourne IT will pay $61 million for Internet hosting company WebCentral heralds an assault on the dynamic software-as-services market, and concludes the latest chapter in the rise and rise of WebCentral director – and onetime OzEmail founder – Sean Howard’s bank account balance.
Howard and Lucy Turnbull, WebCentral’s chairwoman, own 39.5 percent of the company between them and stand to make $24 million in cash and shares when the deal is finalised.
Melbourne IT has committed the merged venture to the software-as-a-service model, a decision that could strengthen an otherwise ordinary union, according to IBRS analyst Kevin McIsaac. He said yesterday that the area was “very hot” and had strong potential for growth.
McIsaac added that the market was looking for more information on how the merged company would be run, and the amount of influence Turnbull and Howard would have on the new Melbourne IT Board. “It might work out very well …
but you don’t know,” he said yesterday.
Certainly, news of WebCentral’s sale received a lukewarm response on the ASX, with Melbourne IT’s shares trading down three cents on Monday, and another three cents yesterday to close at $1.69.
“The proposed acquisition will bring together two of Australia’s leading Web-services businesses, generating significant benefits for customers, shareholders and staff of both companies,” said Theo Hnarakis, CEO and managing director of Melbourne IT.
Hnarakis said the proposed consideration values each WebCentral share at $1.53, a premium of approximately 43 percent over the five-day volume weighted average price (VWAP) for the shares in the period to Friday May 19.
‘Merger synergies’ tipped
Lucy Turnbull, WebCentral chair, pronounced IT’s proposal a very attractive
offer: “The board is excited about the prospects for the new merged business. This transaction will create a much larger company with greater scale and breadth of operations which will benefit both shareholders and customers. There are expected to be significant merger synergies,” she said.
WebCentral was founded in 1999 by entrepreneurs Lloyd Ernst, Byron Newton and Joe Altoff in a garage in Brisbane’s Morningside. In 2001, FTR Holdings, an ASX-listed vehicle controlled by Sean Howard, former PBL journalist Trevor Kennedy and republican-turned-Liberal-pollie Malcolm Turnbull (Lucy’s husband), paid $11 million for 49.4 percent of the company.
In 2004, FTR laid out almost $20 million for the 50.6 percent stake in WebCentral that it didn’t already own. If the transaction announced this week goes ahead, Trevor Kennedy is likely to make $5.5 million. Former NSW Premier “Nifty Neville” Wran, with a seven percent stake in the company, stands to earn a tidy $4.3 million.
The Howard-Kennedy-Turnbull triumvirate is most famous for creating ISP OzEmail, then flogging it to MCI/Worldcom of the US for something like $540 million. Malcolm Turnbull stepped down as chairman of WebCentral in 2004, handing over to his missus.