Vocus merger to create $3bn challenger

Published at Sep 28, 2015, in Technology

Vocus Communications (ASX:VOC) and M2 Communications (ASX:MTU) are aiming to merge to create a $3 billion telecommuncations giant which will become the fourth largest in Australia and third largest in New Zealand.

Vocus told the market this morning that the directors of the two companies had agreed on the plan, which will see M2 shareholders grab 1.625 Vocus shares. That means existing M2 shareholders will hold 56% of the merged entity.

The deal still needs to be signed off by investors, but a merged entity would become a company with $1.8 billion in revenue and $370 million in EBITDA, before any synergies are explored.

The new company would soar into the ASX100 and become the fourth largest integrated telecommunciations company in Australia, ranking behind Telstra, TPG, and Spark.

Currently, M2 and Vocus are number four and five respectively.

Chairman of VOC, David Spence, said the deal would create scale to go after big fish in the market.

“The businesses combine Vocus’ telecommuncations infrastructure and corporate customer base with M2’s demonstrated expertise in the consumer and SME segments,” he said.

“Our ability as a merged company to capture future growth opportunities in Australia and New Zealand will be significantly enhanced.”

The deal will go before shareholders in early 2016.

About Vocus and M2

Vocus is the wholesale partner of the two, with it being a provider of data centre, dark fibre, and international internet connectivity across Australia, NZ, Singapore, and the US. It owns 1600km of metro fibre in Australia and 4300km of intercity fibre in New Zealand.

M2 on the other hand is the consumer provider with brands such as Dodo and iPrimus in its stable. It also plays in the business segments alongside its consumer offering in both Australia and New Zealand.

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