The MNF Group Ltd (ASX: MNF) share price has been a positive performer on Monday morning.
At the time of writing, the VoIP network provider's shares are up 6% to $5.25.
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Why is the MNF share price charging higher?
Investors have been bidding the MNF share price higher today after it announced an agreement to sell part of its Direct Business to Vonex Limited (ASX: VN8).
According to the release, the two parties have signed a non-binding term sheet for $31 million. This values the direct business at approximately 2x revenue.
Management notes that the sale is in-line with MNF's strategy to simplify its business, grow recurring revenues, and focus on growing the MNF wholesale business, Symbio.
As part of the term sheet, MNF and Vonex intend to enter into a binding five-year Symbio wholesale supply agreement for phone numbers and minutes. This wholesale agreement is expected to retain in excess of $3 million per annum in long term revenue.
The deal remains conditional on satisfactory outcomes of due diligence, Vonex receiving funding, and board approvals from both parties. If everything goes to plan, MNF expects that an asset sale agreement will be executed in July.
Which business is being sold?
The release explains that the Direct Businesses that form the sale agreement include those that provide cloud phone, mobile, and internet services directly to small business and residential customers in Australia.
These customers are predominantly served by the MyNetFone brand. However, the brand is not part of the sale and MNF will retain the Enterprise and Government clients.
MNF's CEO, Rene Sugo, said: "The divestment of these direct businesses is in line with our strategy to simplify MNF's business and drive growth in our CPaas and UCaas voice services, which are in high demand. Importantly, funds from the sale will be reinvested into our growing wholesale business and our expansion offshore. Assuming all conditions are met, we expect the sale to be completed by end of July 2021."
Guidance reaffirmed
In addition to the above, the company has taken this opportunity to re-affirm its operating earnings guidance for FY 2021 of $40 million to $43 million.
