Arq Group sells wholesale reseller arm TPP for $24M

Martin Mercer (Arq Group)

Arq Group is to divest its TPP Wholesale reseller business in a bid to cut its debt following a period of plummeting profits.

The Melbourne-based IT services provider will sell a significant chunk of its indirect SMB business to the London-based domain hosting registry CentralNic Group for $24 million.

After the deal’s completion -- expected by 30 June -- CentralNic will assume management of TPP’s customers and will offer roles to the Arq employees currently working in the business.

Arq Group signalled its divestment intent following its 2018 financial results which saw it post a net loss after tax of $2.3 million.

The company said the deal will provide the “balance sheet flexibility” needed for it to invest in its digital service strategy.

“The Group’s  decision to extend  its focus from domains and hosting to becoming a true digital partner for Australian businesses, resulted in the TPP reseller business being considered a non-core operation,” Arq Group CEO Martin Mercer said. “The sale of TPP will enable the group to accelerate its digital services growth strategy,with a clear focus on its key capabilities.”

The indirect business involves about 11,000 channel partners, to whom Arq sells domain and hosting services. As of its last financial results, the division contributed $25.6 million revenue and $13 million in EBITDA.

However, the TPP arm was deemed no longer “core” to the publicly-listed company’s long-term ambitions of becoming a “leading digital solutions partner”.

Arq Group will still retain a “small residual” of its SMB indirect business after the deal, while retaining its “strongly performing” Enterprise Services division and SMB Direct business, which include the businesses WebCentral, Netregistry, WME and Domainz.

In the two years following the sale, Arq Group will continue to provide support services and work with CentralNic through the transition.

“Having run a competitive process we are very pleased that CentralNic is the successful acquirer of TPP,” Mercer added. “CentralNic’s global expertise and leadership in the sector will greatly benefit TPP customers through future investment and commitment to the business.”

Arq Group has embarked on an effort to rebrand itself as a digital business since April last year when it changed its name from Melbourne IT Group. Four months later, the company posted a net loss of $2.6 million for the half year ending 30 June 2018 but said it had “laid the foundations” for transformation.

Last month, Arq Group became the first Australian managed services provider (MSP) to achieve mobile competency status with Amazon Web Services (AWS).