Singtel

Singtel: Singtel has announced its 98% acquisition of Trustwave, the largest independent security service provider in North America, Europe and the Asia Pacific. The CEO of Trustwave will hold the remaining 2% of outstanding shares.

At US$810m before net debt and working-capital adjustments, the deal could be Singtel's largest acquisition since Optus.

The acquisition will expand Singtel’s existing portfolio of cloud-based solutions, while leveraging on Trustwave’s expertise to meet the demand for managed security services in North America and the Asia Pacific region.

Singtel also cites rising incidents of cyber security attacks worldwide for buying Trustwave. The latest prominent attack being the hacking of Sony Pictures' computer systems in 2014 by a group known as Guardians of Peace, where embarrassing emails were released and threats were directed at Sony’s controversial “The Interview” movie.

With this acquisition, Maybank-KE sees more pressure on Singtel’s P&L from interest charges for debt taken to pay for the deal and Trustwave’s own losses. These pressures would add to existing capex pressures.

On top of that, the industry faces the threat of a potential fourth mobile operator.

Pending more details from its briefing this morning, Maybank-KE would be keen to find out why Singtel feels the need to own a cyber-security service provider when it can partner one to roll out solutions to its enterprise customers. Singtel had earlier budgeted SG$2b for investments over three years.

For now, Maybank-KE is maintaining its hold rating on Singtel with a TP of $4.55.