KEY POINTS:
Listed mobile radio company TeamTalk is to buy a majority stake in fibre-optic network provider CityLink for $12.68 million.
CityLink - 98.7 per cent owned by Lower Hutt businessman Ron Woodrow - operates high-speed data networks for business customers in Wellington and Auckland. It also has plans to expand to Christchurch.
TeamTalk managing director David Ware said the acquisition would capitalise on a "mindshift" among IT and communications managers as they looked beyond the major telcos for cheaper and more advanced services.
TeamTalk is to acquire 67 per cent of CityLink and the company's management is buying the remaining 33 per cent.
Together, they will pay $22.76 million for all of CityLink's shares and assets associated with its Auckland network.
Woodrow's share of that is about $22.5 million.
Ware said the acquisition, which requires shareholder approval, came after a three-year search for suitable opportunities.
"We have very strict investment criteria - it had to be a proven business model, in profit with excellent growth prospects."
CityLink's revenue has been growing at about 20 per cent a year for the past four years. It had $2.5 million in operating profit this year and was forecasting $3 million next year.
The acquisition is forecast to lift TeamTalk's earnings 2c a share over the first year.
Ware said TeamTalk's balance sheet would remain strong and the company would maintain its current dividend payouts.
TeamTalk this year bought a major stake in wireless "last mile" internet service provider Araneo.
TeamTalk shares closed unchanged at $2.35 yesterday.
