Techpacific to take 51% of Spike CyberWorks; PCCW pulls out

techpacific agreed to acquire a 51% stake in Spike CyberWorks as PCCW exits the joint venture.
Techpacific.com, an incubator and internet service company, said it plans to acquire 51% of Australian web development company Spike CyberWorks in a cash and stock deal worth about A$21.50 million ($11.13 million). The acquisition will give Hong Kong-based techpacific access to the Australian and Japanese markets and will help boost Spike CyberWorks' presence in Hong Kong.

Techpacific agreed to issue about 100 million new shares to acquire the 30% stake in Spike CyberWorks currently owned by Hong Kong's Pacific Century CyberWorks (PCCW). The shares will give PCCW a stake of roughly 4.5% in techpacific and dilute existing shareholders' stock by a corresponding amount.

At the same time techpacific will inject A$11 million in cash into Spike CyberWorks in return for an additional 21% stake, bringing its total holding to 51%. The agreement is subject to the completion of a detailed analysis of Spike CyberWorks by techpacific. Spike CyberWorks is 70% owned by Sydney-based Spike Networks, which lost A$27 million in the year to June 30 because of the failure of its internet radio business. Most of the company's A$17 million in revenue came from Spike Cyberworks.

"This gives us one of the largest digital services firms in Asia, with leading market shares in Japan and Australia," said Johnny Chan, techpacific's chief executive officer. "It makes a lot of sense for us because if we were to develop our e-services business organically it would take us a lot of time."

Techpacific, which listed on Hong Kong's Growth Enterprise Market in April, is still sitting on US$38 million in cash. It will use part of that money to pay for the Spike stake and it plans further acquisitions later.

PCCW didn't say why it had decided to sell its stake in Spike CyberWorks. In addition to the 30% it held, PCCW also had an option to increase its stake to 50%. Representatives from the company weren't immediately reachable for comment. PCCW is getting out of the venture less than six months after getting in. Debt-laden PCCW paid A$15.3 million in June for 30% of Spike CyberWorks and a 5% stake in Spike Networks. PCCW said in a statement that it is "delighted to join up with techpacific.com" while at the same time maintaining an indirect interest in Spike CyberWorks.

Spike CyberWorks provides technology consultancy for companies building a presence online. The company advises on strategy, develops and designs web sites and builds digital platforms from which companies can provide services online.

Spike Networks, which was formed in 1995, listed its shares in Australia for the first time in July. It sold 24.6 million shares, or 28% of the company, at A$1.45 to raise A$35.7 million. Since then the company's shares have plummeted to A$0.20 a share as investors reacted negatively to the company's attempts to build a global internet radio station.

Now Spike is focusing again on its core digital services business. The company has developed, and maintains, some 600 corporate and institutional web sites and has developed online publishing and information management systems. The company has 120 employees in Sydney, 35 in Tokyo and 10 in Hong Kong. Techpacific's Chan said his company hopes to build up the Hong Kong unit.