In an unbelievable result, Amcom Telecommunications Limited (ASX: AMM) and Vocus Communications Limited (ASX: VOC) will join forces despite the best efforts of larger rival TPG Telecom Ltd (ASX: TPM) to derail the merger.
Amcom and Vocus first agreed to merger terms in December last year, which the market responded warmly to. But in the months that followed a number of issues arose, including the decision of TPG Telecom (which was already a large shareholder of Amcom) to build a 19.9% blocking stake in the business.
TPG made it clear that it was not interested in a takeover, it had simply built up a blocking stake in the hope of derailing its rivals' plans to become a major player in Australia's booming telecommunications industry.
As a result of this move, most people believed the deal would almost certainly fall through. Indeed, in order to succeed, at least 75% of shareholders (other than TPG) needed to vote in favour of the transaction, which is nearly unheard of considering voting is not mandatory.
How the Deal got through
In order to get the deal over the line, Vocus strategically offloaded its own shares in Amcom in order to free up more shares for voting purposes, given that it would not have been allowed to vote in favour of its own deal.
At the same time, Amcom's management showed enormous spirit as it contacted shareholders and rallied the troops, which saw its owners vote in record-breaking fashion. In fact, according to the Fairfax press a remarkable 90% of proxy votes (excluding TPG's holdings) voted for the deal to proceed – a result that is almost unheard of.
Indeed, the two businesses have natural synergies given that Amcom, which is based in Perth, has a strong presence in the west while Vocus, based in Sydney, has a solid grip on the market in the east. A tie-up will result in an entity worth around $1.2 billion which will allow it to threaten the dominance of TPG, as well as industry behemoth Telstra Corporation Ltd (ASX: TLS).
Amcom will need to get court approval before the deal can go ahead but today's result is certainly a massive win for shareholders of both companies. The pair remain in a trading halt pending an official announcement.
