The mooted merger between Amcom Telecommunications (AMM) and Vocus Communications (VOC) was revealed yesterday after more than a month of talk and speculation.
Under the deal, Amcom will be bought out by Vocus, in a deal that values Amcom at $635 million.
Trading in shares of both companies were halted yesterday ahead of the deal being announced.
Trading later resumed and Vocus shares eased half a per cent to $5.71 and Amcom shares rose 0.4% to $2.36.
Vocus’ offer was first made in late October, and discussions have continued since then.
The deal will see Vocus pay $2.40 a share for Amcom in Vocus shares, compared with the $2.09 Amcom shares were trading in late October when the deal was first disclosed.
Amcom had a market value of around $626 million yesterday ahead of the announcement. Vocus had a market capitalisation of $602 million.
Vocus CEO James Spenceley, who has been pushing the deal since late October, will be the head of the new company.
Amcom CEO Clive Stein is the loser and will exit after a transition period.
Together the telcos will create a merged unit with a market value worth $1.1 billion.
VOC vs AMM YTD – Vocus, Amcom deal comes to fruition
In late October Vocus increased its stake in Amcom to 10%. That came with a proposal from Vocus to merge the two companies in a full scrip deal.
Amcom chairman Tony Grist said in yesterday’s statement it was a great outcome for shareholders in both companies.
"We’re creating a business that is a significant national infrastructure carrier in Australia," Grist said.
"Logically, our dominance in Perth and Adelaide and Darwin, and Vocus’ strength in Sydney, Melbourne and Brisbane, in bringing the businesses together we’ll have a carrier with over 2700 on-net buildings in Australia, and around 7400km of fibre in Australia and New Zealand, and over 20 data centres in Australia and New Zealand."
Amcom and Vocus sell cloud and telecommunication services to enterprise, government and corporate clients, but in different parts of Australia.
A merger between the two would create the third-largest provider of corporate and office telecommunications in Australia, after Telstra and Optus.
But it is not the third biggest telco in Australia – that’s TPG Telecom of Sydney, which has built a 7% stake on Amcom.
TPG has a market value of more than $5.1 billion, and while it is rolling out its broadband links and integrating AAPT, it still has the firepower to bid for the merged company if it wants to in the near future.
The way Vocus and Amcom will do the deal opens the door to TPG to interfere to strengthen its position.
The two companies have entered into a Scheme Implementation Agreement under which Vocus will acquire the outstanding 90% of shares it doesn’t own in Amcom via a scheme of arrangement.
Amcom shareholders are to receive 0.4614 Vocus shares for each Amcom share. That will give TPG just over 3% of the merged company.
The Scheme will be subject to Amcom shareholder and Court approvals. If approved, Amcom shareholders will receive a fixed exchange ratio of 0.4614 Vocus shares for each Amcom share, representing a value of $2.45 per Amcom share based on Vocus’ undisturbed closing share price on 24 October 2014.
The Scheme consideration will not be adjusted by any interim or special dividend declared by Amcom or Vocus prior to implementation, subject to an agreed cap of $0.05 per share for Amcom and $0.063 per share for Vocus.
But Vocus can’t vote its 10% of Amcom, meaning TPG’s stake in Amcom is really 7.7% or a bit more in terms of the vote for the scheme of arrangement. That gives it some leverage if it wants to assert its position.
