South Australian ISP, Chariot Limited (ASX:CTI), has secured a major share of the key Melbourne ISP market with the acquisition of medium sized ISP Alphalink.

The privately owned Alphalink is one of Melbourne’s largest independent ISPs and brings into the Chariot national network, around 30,000 ISP customers.

The acquisition – the largest yet by Chariot – is earnings accretive immediately, propels Chariot’s total customers beyond its June 30 target this year and establishes Victoria as the Company’s largest customer segment.

Under the deal, which is subject to approval by Chariot shareholders, Chariot will pay $6.5 million for all the issued capital in Alphalink as follows:

• $2.5 million in Chariot scrip to be issued to the vendors at 70 cents per share which represents a 40% premium to the current market price;

• $2 million in cash; and

• $2 million via a loan facility from the vendors.

The acquisition of Alphalink as foreshadowed in today’s earlier announcement has been pending since in December 2004. However, due to the restrictions of the Datafast merger implementation agreement Chariot could not finalise the acquisition.

The acquisition will take Chariot from approximately 150,000 customers to approximately 180,000 customers.

“With an existing subscriber base spanning the country from Cairns to Adelaide, the acquisition of Alphalink provides an excellent opportunity to enter the Melbourne metropolitan market for the first time and in a significant manner,” chariot managing director, Robert Horlin-Smith, said today.

“This acquisition provides Chariot with the ability to value-add to this key market through both our own ISP performance in tandem with our expanding voice over internet suite of products through our Transcom holdings."

Horlin-Smith said the Alphalink deal continued Chariot’s aggressive but well publicised ISP acquisition strategy of the past three years.

“We are hungry for further ISP acquisitions, particularly along the eastern seaboard, and currently have several such opportunities undergoing due diligence,” he said.

“Alphalink is however, one of the last medium sized ISPs available in the market and those seeking to exit the sector as it continues to consolidate, will need to present genuine value-adds to Chariot and other acquirers if a fair and reasonable price is to be agreed.”

Chariot has acquired 11 ISPs in the past 18 months and is now the eighth largest ISP in the domestic market.

In a separate announcement, Chariot maintains that it was the party that terminated the merger agreement with WA ISP Datafast Telecommunications Limited (ASX: DFT), contrary to Datafast's statement the previous day. In a virtual mirror image of the Datafast announcement, Chariot's statement to the ASX read: "As a result of further information obtained about DFT during the due diligence inquiries, Chariot determined that there were a number of matters that impacted materially on the desirability of proceeding with the merger and that consequently the merger would not be in the best interests of Chariot’s shareholders."

Rather than getting into a slanging match, perhaps both parties should just agree to concede that it was not in the interests of either company to merge because they're obviously not a good fit for each other.

CTI shares closed sharply up 12c to finish on 62c but trading was thin.