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Vocus takes remainder of Amcom

Vocus Communications has acquired the remainder of Amcom Telecommunications in a deal that is likely to see the two former rivals become a combined entity worth more than AU$1 billion.
Written by Leon Spencer, Contributor on

Vocus Communications and Amcom Telecommunications look set to become a single entity with a combined market cap of over AU$1 billion. The two companies are entering into an agreement that will see Vocus acquire the remaining 90 percent of its former rival.

The companies announced the deal on Wednesday afternoon following a trading halt on the Australian Securities Exchange.

In a joint statement (PDF), Amcom and Vocus told shareholders that they had entered into a Scheme Implementation Agreement under which Vocus will acquire the remaining Amcom shares left over after the 10 percent stake is snapped up in late October.

The former rivals said they had identified cost synergies of at least AU$13-15 million per annum, which they expect to be fully implemented by the end of the 2017 financial year.

In addition to these cost synergies, the companies have identified "significant revenue synergies" from the expanded and complementary product sets, and cross-selling opportunities to respective customer bases.

With Vocus claiming a market capitalisation of AU$556 million, and Amcom possessing a market value of AU$495 million, a combined entity resulting from the tie-up could be worth over AU$1 billion.

The transaction is expected to be highly earnings and cash-flow accretive to both of the companies' shareholders in the first full year following its completion.

"Vocus and Amcom are highly complementary businesses that make this transaction strategically unique," said Vocus chairman David Spence in a statement. "This acquisition enhances Vocus' positioning to create a national telecommunications infrastructure provider to service commercial, channel, and wholesale customers."

Amcom chairman Tony Grist said the proposal represents an "attractive" value outcome for shareholders, and a unique opportunity to participate in the combined entity's continued growth.

"The combined businesses are incredibly complementary and the combination will add scale, significant synergy benefits, and real value for both companies' shareholders," said Grist.

Under the terms of the deal, three Amcom directors are set to join an expanded Vocus board, which will now total eight people. Grist will become deputy chairman, with Spence to continue as chairman, while James Spenceley remains as Vocus CEO.

Amcom CEO Clive Stein will continue with the Amcom business for a period following completion of the transaction to "ensure a smooth transition".

The agreement will be subject to Amcom shareholder approval. However, the board of directors has unanimously recommended that shareholders vote in favour of the scheme.

If approved, Amcom shareholders will receive a fixed exchange ratio of 0.4614 Vocus shares for each Amcom share, representing a value of AU$2.45 per Amcom share, based on Vocus' closing share price on October 24.

The implementation of the deal remains subject to a number of conditions, including court approval, an independent expert finding that the scheme is in the best interests of Amcom shareholders, and satisfaction of all regulatory approvals, in addition to shareholder approval.

Subject to its approval and other conditions being met, the scheme is expected to be implemented by April 2015.

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