Workers at Archer Capital

Friday 18th September 2009

Employees of Cogent Communications, the phone services group owned by buyout firm Archer Capital, have been offered the opportunity to buy shares in Zintel Group after their attempts at a management buyout faltered.

NZAX-listed Zintel has agreed to acquire Cogent for $1.9 million, creating a communications business with combined sales of $60 million. It separately plans to offer 3.33 million shares at 30 cents apiece to employees of Cogent, helping recoup some of the purchase price.Cogent is part of OneSource Group, which Archer teamed up with managers to buy from Hanover Group in 2005 for $150 million. The other arms of OneSource are Leasing Solutions Ltd., which arranges for phone equipment leases, and Konica Minolta Business Solutions.

“Cogent is very complementary to our business,” said Zintel chairman Nick Gordon. “We’ve been looking for some time for a significant acquisition that would have a lot of synergy.”

Shares of Zintel last traded unchanged yesterday at 30 cents, having gained 20% in the past month. Gordon said a number of employees at Cogent had wanted to make a management buyout but hadn’t managed to conclude a deal.Instead they will be offered fully-paid shares in Zintel, raising $1 million.

Cogent will strengthen Zintel’s regional offering, as it is strong in places like Nelson, where Zintel is smaller, Gordon said. It also has a strong equipment leasing business and one part of the deal is a strategic relationship with OneSource for leasing finance, he said.

Zintel said additional working capital, transitional costs and one-off expenses “will significantly impact” profit in the year through March 31, 2010, though the group will “enjoy considerably improved growth and profitability in future years.”

Zintel has aspiration to migrate to the main NZX board and the acquisition is a step toward that, Gordon said.

Businesswire.co.nz

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