Telstra’s unusual, unsurprising Pacnet purchase

Contact: Scott Denne Agatha Poon

Telstra reaches for Pacnet in an uncharacteristic – but rational – deal. The $297m purchase price, at a $697m enterprise value, makes Pacnet a substantially larger target than anything Telstra has bought. According to The 451 M&A KnowledgeBase, Telstra has made six acquisitions (including today’s) this year. Prior to today’s announcement, it had never paid more than $270m in a transaction (a mark it set earlier this year with the pickup of video software vendor Ooyala) in the past 15 years.

Also, like Ooyala and unlike Pacnet, most of its past acquisitions aimed to move the Australia-based telecom giant into ancillary offerings, while the Pacnet buy supplements a core business. Earlier this year, Telstra bought Ooyala as well as a video ad serving business, Videoplaza, to supplement that. It inked two acquisitions to bolster its healthcare software offering, after having scooped up the foundational piece of that business with the 2013 reach for Database Consultants Australia’s eHealth division. Telstra was a muted acquirer from 2010-2012, but even in its earlier phase of active M&A (11 deals between 2004-2009), it largely focused on snagging Asian Web properties.

With Pacnet, Telstra is obtaining assets such as datacenters and fiber and undersea cables that support its ambition to make the company a strong regional and global player in enterprise services, which is already a $4bn business annually.

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