M2, Vocus eye growth with merger plan

The two companies will merge by way of an scheme of arrangement, with M2 shareholders to receive 1.625 Vocus shares for each M2 share, if the deal is approved.

“The businesses combine Vocus’ telecommunications infrastructure and corporate customer base with M2’s demonstrated expertise in the consumer and SME [small-medium enterprise] segments”, he noted in a statement.

In a statement this morning, M2 said its board of directors unanimously recommended shareholders back the deal, in the absence of any superior proposal and pending the report of the independent expert.

“Both have successful track records of creating substantial value for shareholders and, together, we will retain this focus”.

The merged company will become the 4th largest integrated telco in Australia and the 3rd largest in New Zealand and will be called “Vocus”.

Australian and New Zealand wholesale IP transit and voice supplier Vocus and M2 Group have signed a merger agreement that will create the fourth-largest telecoms company in Australia by market value and the third biggest in New Zealand.

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Commenting on the proposed merger, Ovum telecoms research director David Kennedy said that Vocus operates primarily in the enterprise and wholesale market which is where the impact will be felt.

The firms describe the merged entity as “a full-service vertically integrated, infrastructure-backed trans-Tasman telco”.

Its shareholders will own 56 per cent of the merged group, which will be run by M2 chief executive Geoff Horth.

It is prominent in the retail broadband market with its Dodo and iPrimus brands, a market Vocus has not operated in.

Australia’s telco heavyweights face a new rival, with Vocus Communications and M2 Group striking a deal to create a $3 billion player in the fast consolidating sector. On top of the combined revenue, the companies stated they expected “cost synergies” of about $40 million per year by the end of the 2018 financial year. The deal followed Vocus’ earlier purchase of Maxnet, and Auckland-based ISP and data centre operator.

It has been a busy year so far for Vocus, which agreed to buy out network operator Amcom in late 2014 and spent the first six months of 2015 fighting off a challenge from TPG.