M2 and Vocus announce merger plans

28 Sep 2015

More consolidation in the Australian telecoms sector is on the horizon, with the Vocus Communications and M2 Group having announced the inking of a Merger Implementation Agreement (MIA), under which the two companies will merge, by way of an M2 scheme of arrangement.

The MIA is subject to the usual conditions precedent for a scrip merger such as this, including M2 shareholder, Court and regulatory approval (including the Australian Competition and Consumer Commission [ACCC]), the Independent Expert’s opinion, and no material adverse change occurring to either party. If the deal is approved, M2 shareholders will receive 1.625 Vocus shares for each M2 share they hold. A scheme booklet is expected to be dispatched to M2 shareholders in late 2015, with a vote on the plans to be conducted in early 2016. Subject to the conditions of the scheme being satisfied, the Scheme Implementation Date will be early 2016.

A press release confirming the development claimed that the combined entity would become the ‘fourth largest integrated telco in Australia and the third largest in New Zealand’. Specifically, it was noted that the merger would create a ‘full-service vertically integrated, infrastructure-backed trans-Tasman telco’. Post-merger the enlarged company would boast a diverse product portfolio, including: retail internet, corporate internet and IP voice, wholesale internet and IP voice, data centre and cloud services, international and domestic bandwidth and dark fibre. In financial terms, the two companies boast a combined annual revenue of around AUD1.8 billion (USD1.3 billion) and EBITDA of around AUD370 million, before synergies. Post-merger the duo would expect cost synergies of around AUD40 million per annum, to be fully realised by the end of June 2018.

Australia, New Zealand, CallPlus, Vocus Group (incl. Commander, Dodo, iPrimus), Vocus New Zealand (incl. Orcon, Slingshot)