Converge ICT Solutions Inc. has approved a share buyback program of P6.5 billion from Coherent Cloud Investments, as part of its objective to increase shareholder value.
Coherent Cloud, an affiliate of Warburg Pincus, has announced it will place 288.7 million shares, or 3.8 percent of the company’s outstanding share capital, at a price of P25 per share through an accelerated book build offering (ABO).
The price of the share buyback will be at the same price as the ABO.
Converge ICT has sufficient unrestricted retained earnings to cover the Buyback, which will be funded by a drawdown of existing debt facilities.
Converge ICT’s financial position after this Buyback remains well within its debt covenants, while capex plans continue to remain fully-funded through its operational cash flow and existing debt facilities, including its recent P10 billion bond.
The buy-back program is expected to increase Return on Equity to shareholders by 1.5 percentage points to approximately 24 percent.
“The share buyback highlights the confidence of the founders and management team in Converge ICT’s long-term, sustainable growth potential, value creation and ability to capture
the vast market opportunity,” says Dennis Anthony H. Uy, Founder and Chief Executive Officer of Converge ICT.
Upon completion of the ABO and the Buyback, Converge ICT’s public float will increase to over 30 percent, up from approximately 20 percent at the time of IPO in 2020.
Coherent Cloud will also distribute within 30 days, its remaining shares in Converge ICT to certain parties as part of existing arrangements.
This distribution will also be effected at the same price as the Buyback and ABO, and will include a lock-up on these shares until the end of 2022.
The increase in free float since the IPO has helped Converge ICT to most recently qualify for inclusion into the MSCI indices, which will be effective on 31 May 2022, following the company’s inclusion into the FTSE Global Equity Index Series (Small-cap), FTSE Renaissance IPO Index, FTSE ASEAN All-Share Index, FTSE ASEAN Star, and the PSE Index over the past year.
Saurabh Agarwal, Managing Director of Warburg Pincus will continue to remain on Converge ICT’s board following the completion of the transactions.
“Warburg Pincus invested in Converge ICT several years ago to partner with Dennis and Grace in fulfilling their vision of building a business focused on providing high-speed fixed broadband to millions of unserved and underserved households and businesses across the Philippines," Agarwal noted.
"We are extremely proud of what Converge ICT has achieved over the last few years and believe it continues to be well positioned to accelerate its growth trajectory and further capture a significant share of the market," he elaborated.
"The company now has a deep bench of management team in place and I am confident this is the right stepforward for us as well as the company. Converge ICT will undoubtedly cement its position as the largest high-speed broadband operator in the Philippines,“ Agarwal concluded.