After evolving from a merger of equals into a friendly takeover, the proposed acquisition of Amcom Telecommunications by Vocus Communications has shareholders from both sides and analysts positive about the new $1.1 billion entity's future.
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Sydney-based Vocus has mounted a play for the Perth-based Amcom, valued at $653 million, which will involve Amcom shareholders receiving 0.4614 shares in the combined company for each share they own, representing a value of $2.45 a share. The deal does not involve any cash payment and is subject to shareholder and regulatory approval.
Perpetual portfolio manager Jack Collopy, who owns a 5.5 per cent Vocus stake in his portfolio, saw the advantages of the deal.
"It's an obvious amalgamation, given there are revenue and cost synergies," Mr Collopy said. "I think that in itself and the parties both accepting that the combined entity is more powerful than the separate ones is a good thing for shareholders in both companies.
"Amcom had customers [in Sydney] where they were renting the fibre networks and they have a deep customer base that could utilise the Vocus network and vice versa."
Wilson Asset Management chief investment officer Chris Stott, who owns a small stake in his portfolio, was confident about the new businesses prospects.
"A combination of these two companies presents quite a powerful entity in the telecommunications sector for decades to come," Mr Stott said.
Vocus and Amcom have identified savings of at least $13 million to $15 million by the end of the 2017 financial year from combining the businesses. The companies said the transaction was expected to be highly earnings and cashflow accretive for both sets of shareholders in the first full year after completion, after costs of the deal.
Citi analyst Ross Barrows downgraded his recommendation on Amcom from "buy" to "neutral", but that was based on the company's shares being in his target range and near the value of the offer from Vocus. Mr Barrows is confident about the combined business's prospects.
"The larger fibre network footprint could result in incremental capex savings – ie, capex that would have otherwise been spent to connect additional revenue to their fibre network could now be saved," he said.
"Combining the infrastructure footprint and moving off-net customers to the combined entity's infrastructure (on-net) could result in margin improvements."
There is speculation that TPG Telecom is interested in Amcom. It is a significant shareholder, but the company could not be reached for comment. Amcom chairman Tony Grist said he could not speculate on a counter offer from TPG and he had not been approached.
