M2 shareholders approve Vocus merger

Shareholders of M2 Group have voted in favour of the merger deal with Vocus Communications, with the two companies to form the third-largest telecommunications provider in New Zealand and the fourth-largest in Australia, worth more than AU$3 billion.

M2 shareholders voted overwhelmingly in favour of the merger, with 99.69 percent, or 120,555,102 votes for; 271,690 votes abstaining; and just 370,023 votes against.

Proxy votes received prior [PDF] to Thursday morning's shareholder meeting were also in favour of the merger, with 118,361,388 votes for; 2,027,890 votes open; and only 369,590 votes against.

The companies' Merger Implementation Agreement gained the support of both boards in September, with the companies forecasting combined revenues of AU$1.8 billion for FY16, as well as earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$370 million.

Occurring via an M2 scheme of arrangement, the merger is scrip based, wherein M2 shareholders will be given 1.625 Vocus shares per M2 share.

M2 chief executive Geoff Horth will be appointed CEO of the combined entity, while founder and CEO of Vocus, James Spencely, will take the role of executive director.

"The merger of Vocus and M2 is a compelling opportunity for all shareholders," David Spence, chairman of Vocus, said at the time.

"The businesses combine Vocus' telecommunications infrastructure and corporate customer base with M2's demonstrated expertise in the consumer and SME segments. The merger creates the 4th-largest vertically integrated telecommunications company in Australia, and the 3rd largest in New Zealand."

The combined entity will provide retail internet, retail electricity and gas, corporate and wholesale internet and VoIP, datacentre and cloud services, domestic and international bandwidth, and dark fibre.

In November, the Australian Competition and Consumer Commission (ACCC) announced that it would not oppose the M2-Vocus merger.

According to the ACCC, the merger will be permitted to take place because the companies have "limited overlaps" in providing wholesale and retail fixed broadband services and datacentre services -- and even when they do overlap, they are focused on different customer segments, with Vocus targeting enterprise and government while M2 delivers services to residential and small business customers.

ACCC chairman Rod Sims said that the merger would also not reduce competition to a significant extent among telcos.

"The ACCC concluded that this was primarily a merger between two complementary businesses. Significantly, the merged firm will also face significant competition from Optus, Telstra, and TPG. This merger consolidates the fourth player in the market," Sims said.

This was followed in December by the New Zealand Commerce Commission saying it would not oppose the merger, as it would not substantially lessen competition, because Vocus and M2 do not compete directly, and due to there being a number of other players in the affected markets.

"While both Vocus and M2 provide calling, broadband, and data services to residential and commercial customers, they are not close competitors for any of the services that they provide," said ComCom chairman Mark Berry.

"We also consider that strong competition will continue to be provided by Vodafone, Spark, and Chorus."

The ComCom also decided that the merger would not enable it to foreclose downstream competitors.

"Given the presence of Spark, Vodafone, and Chorus, which all have large backhaul networks, we did not consider that foreclosure would be likely," said Berry.

The NZ ComCom had earlier released its statement of preliminary issues, detailing the competition concerns it would consider in its decision.

Vocus also attained Australian Federal Court approval in June to acquire Amcom, after the latter's shareholders voted in favour of the AU$1.2 billion takeover, despite TPG's efforts to block the deal.

M2 shares will cease trading on February 8, the new Vocus shares will commence trading on February 9, and the merger's implementation date will be February 22.

Updated at 11.35am AEDT, February 5, 2016: The Supreme Court of Victoria has approved the M2-Vocus merger.