Vocus bids $653 million for Amcom

Vocus will acquire the remaining 90 per cent of Amcom it doesn't own. Photo: Tamara Voninski.
Vocus will acquire the remaining 90 per cent of Amcom it doesn't own. Photo: Tamara Voninski.

Vocus Communications has mounted a $653 million bid for Amcom Telecommunications that would create a new national telecommunications competitor for entrenched market leaders Optus and Telstra.

The acquisition, unveiled on Wednesday, will create one of Australia's biggest telecommunications providers of phone, internet and technology services, with a $1.1 billion market capitalisation.

The deal does not involve any cash payment to Amcom shareholders, rather they will receive shares in the new Vocus business, if they approave the deal.

Vocus will acquire the remaining 90 per cent of Amcom it doesn't own under a scheme implementation agreement. Amcom shareholders will receive 0.4614 Vocus shares for each share in the former, representing a value of $2.45 per share, a 31.7 per cent premium on the closing price of $1.86 before Vocus's original approach was made public.

Vocus originally approached Perth-based telco Amcom on October 27 with an offer to merge. Both sides agreed the move could work as they own fibre cable networks on different sides of the country that can be combined to ­provide a better national service. The proposal later shifted from a merger of equals to an acquisition.

Both companies entered a trading halt in the earlier afternoon prior to the announcement of the acquisition. Before entering a trading halt, Vocus shares were trading at $5.715, while Amcom was sitting at $2.355 a piece.

Vocus's fibre cable network is largely on the east coast of Australia while Amcom is based on the west Coast.

Vocus chief executive James Spenceley has said previously the takeover would create Australia's third-largest provider of corporate telco services, to take on ­ Telstra and SingTel-Optus.

The acquisition of Amcom is the single-largest takeover ever attempted by Vocus.

"We've got a lot of scale in the two businesses, so bringing them together has a great deal of synergy," Mr Spenceley said.

Bringing products of the two businesses together and unifying the offer to add more services to existing customers and grow the existing bases is the big prize moving forward, Mr Spenceley said.

For now, Vocus will focus in integrating the Amcom into its existing operations, but Mr Spencely did not rule out further add-on opportunities.

"This is a big enough transaction, we want to devote our focus to this in making sure we integreate the two businesses as successfully as possible and delivery the most value for shareholders," Mr Spencely said.

"That said we're always on the lookout for complimentary businesses, but this absolutely has our focus at the moment."

Vocus and Amcom have identified savings of at least $13 million to $15 million by the end of the 2017 financial year as part of the combining of the businesses. The companies said the transaction is expected to be highly earnings and cash flow accretive for both sets of shareholders in the first full-year after completion, after costs of the deal.

Vocus chairman David Spence, who will continue in the same role in the combined entity, said that job changes would likely be minimal because there is not a lot of overlap between the two offices.

Amcom chairman Tony Grist, who will become deputy chairman of the combined business, said the company will actually need more people.

"The synergies are going to come out of mutual supply economies and aggregation of buying opportunities. I'm excited that we'll be using people like Seek more often," Mr Grist said.

Asked whether there could be a counter offer from other interested parties, such as TPG Telecom which owns more than 5 per cent of Amcom, Mr Grist said he could no speculate on an offer from TPG and has not been approached.

Vocus will pick the majority of board members while Mr Spenceley is set to run the ­combined company.

The new board will consist of three members the Amcom board and five from Vocus.

The offer has been unanimously recommended by the Amcom board is now subject to shareholder, court and independent expert approval.

Wilson Asset Management chief investment officer Chris Stott, who owns a small stake in his portfolio, was confident about the new businesses prospects going forward.

"A combination of these two companies presents quite a powerful entity in the telecommunications sector for decades to come," Mr Stott said.

This story Vocus bids $653 million for Amcom first appeared on The Sydney Morning Herald.