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Vocus and M2 to merge as $3b ANZ telco giant

28 Sep 2015

Vocus and M2 have announced plans to merge creating a $3 billion full-service vertically integrated telco with capabilities ‘relevant to every individual, corporate and government entity in Australia and New Zealand’.

The merged company will become New Zealand’s third largest integrated telco and Australia’s fourth largest.

David Spence, Vocus chairman, says the merger will combine Vocus’ telecommunications infrastructure and corporate customer base with M2’s expertise in the consumer and SME segments.

The deal continues an aggressive expansion for Vocus which only completed its $780 million acquisition of Perth based telco and IT services company Amcom in July.

Vocus says the merger, which has been unanimously supported by both boards, will create a company with combined revenue of around AU$1.8 billion and EBITDA of AU$370 million in FY16, before synergies, and market capitalisation in excess of AU$3 billion.

M2’s board of directors has recommended shareholders vote in favour of the scheme, which will see them receive 1.625 Vocus shares for each M2 share if approved.

Vocus says the deal will create a full-service, vertically integrated, infrastructure-backed, trans-Tasman telco with a portfolio encompassing retail internet, wholesale and corporate internet and IP voice, data centre and cloud services, international and domestic bandwidth, dark fibre and retail electricity and gas.

The companies expect cost synergies of around $40 million per annum, to be fully realised by the end of FY18.

James Spenceley, Vocus chief executive and founder, will continue on the combined board as executive director with a focus on telco infrastructure strategy, while Geoff Horth, M2 chief executive will be appointed chief executive of the merged group.

M2 founder and executive director Vaughan Bowen, will also continue on the combined board as executive director, retaining a focus on strategic acquisition opportunities.

Craig Farrow, M2 chairman, says the the merged company’s ability to capture future growth opportunities across Australia and New Zealand ‘will be significantly enhanced’.

A vote by M2 shareholders is expected to be held in early 2016. If approved the scheme implementation date will also be early 2016.

The deal is subject to court and regulatory approval, among other approvals required.

Earlier this year, in greenlighting TPG's acquistion of iiNet, ACCC chairman Rod Simms warned that any future merger between two of the four remaining large suppliers of fixed broadband was likely to raise 'serious' competition concerns.

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