Huge Group’s shares plummeted 18.5% after it announced the approval of the business combination of two of its directly and indirectly wholly owned investment companies, Huge Networks and Huge Telecom, yesterday.
At 2pm on the announcement the shares fell to a day low of R2.20 from Friday’s R2.70 close. The shares by 3.27pm yesterday had recovered to R2.65.
“The Business Combination is a part of Huge's organic growth strategy, which will underpin significant growth over the medium and longer term, whilst immediately unlocking significant operational benefits and synergies. The combined new entity will leverage the inherent strengths of both companies for growth,” it said.
The newly enlarged entity would seek to aggressively grow its already substantial combined customer base of more than 19 000 business, and small and medium sized enterprise customers, and would boast a combined turnover of roughly R300 million a year, Huge said.
Dr Marius Oberholzer, the managing director of Huge Networks, had been appointed to lead the Business Combination, which would be implemented immediately.
Huge said the transaction to form the new entity should be completed by March 1, 2023.
Huge Telecom's significant national footprint, partner network, regional presence, and national technical resources, combined with Huge Networks' technology leadership and expertise would greatly enhance the newly enlarged entity's ability to achieve scale, unlock revenue growth and accelerate the delivery of increased shareholder value, it said, adding that the Business Combination would yield various operational benefits.
The Business Combination would bring together the commercial, go-to-market and distribution capabilities of Huge Telecom with the products, services and technical capabilities of Huge Networks to create a stronger, more capable entity.
“The newly enlarged entity would be in a position to offer a significantly expanded product and services catalogue to its customers and more than 900 registered business partners, including an Integrated Telephony Solution (a VoIP service that is integrated into GSM) with dedicated voice transmission and data capabilities that comprise the full spectrum of bearers including fixed 5G and LTE, carrier-grade fibre services and broadband fibre-to-the- business services. In addition, the proposition expands to include data hosting services and platforms, SD-WAN solutions and various security applications,” it said.
The newly enlarged entity, with its National Operating Centre (NOC) based in Centurion and East London, would have an expanded national presence with offices in: Gauteng; the Western Cape; Durban, Pietermaritzburg & Escort; East London; Port Elizabeth; Bloemfontein; Kimberly and George.
The latest move by Huge comes after a board spat three weeks ago, which saw three directors leave apparently over disagreements relating to corporate strategy.
Huge Group is diversifying its portfolio by acquiring entities whose revenues are generated from cloud, software and x-tech.
The company announced the departure of chairman Duarte da Silva, Dr Craig Lyons and Professor Brian Armstrong through the Stock Exchange News Service.
Huge Group subsequently appointed Veran Kathan as new independent non-executive chairman, Mike Beamish as non-executive director, and Izak van de Merwe as new chief commercial officer and executive director.