Australia’s M2 Telecommunications acquires rivals Dodo and Eftel

Australia's largest network independent communications provider M2 Telecommunications Group Ltd has agreed to buy rivals Dodo Australia Holdings Pty Ltd and Eftel Ltd for approximately A$248 million ($258 million) through a cash-and-stock deal.

Dodo will be acquired for A$204 million on a debt-free and cash-free basis, while Eftel will be bought through an off-market takeover at an offer price of A$0.3581 a share, or one M2 share for every 12.34 Eftel shares, representing an enterprise value of A$44 million including debt, M2 said in a statement.

Melbourne-based M2 provides retail and wholesale fixed-line, mobile and data telecommunications services specifically tailored towards small and medium businesses in Australia and New Zealand.

Its leading brands include Commander for bundled services, iPrimus offering broadband, phone, mobile, data services, M2 Wholesale, and Blace+White providing whole suite of telecom services for small and medium businesses.

Last year, M2 acquired Primus Telecommunications Group Inc's Australian business for A$192 in order to expand its business and was looking for more acquisitions to further extend its reach as the nation is switching over to National Broadband Network (NBN).

The acquisition is complementary to M2's existing consumer division, with expertise in delivering low cost new customer acquisition through highly targeted marketing and sales campaigns.

M2 CEO Geoff Horth said, ''The acquisitions are an excellent complement to our consumer division and combined, our business possesses an excellent capability to grow our share of both the consumer and small to medium business markets.''

''Throughout the due diligence process we were very pleased to find the businesses to be highly efficient with robust internal systems and processes; a testament to the skill and dedication of the Dodo and Eftel teams,'' he added.

Dodo is a privately-owned telecommunications company founded in 2001. It is focused on the residential market and well positioned to grow its market share in the transition to NBN world with its a range of low-priced products and services including broadband, home phone, mobile wireless broadband and mobile services. Dodo is also engaged in other businesses including electricity, gas and insurance.

According to some estimates, Dodo has around 400,000 customers, while Eftel has about 130,000.

Accepting the M2 offer, Eftel director Kestelman said, ''The transaction is a unique opportunity to increase Eftel's presence nationally, enhance its product and service offering to its customers, and create a combined entity that will have a strong and sustainable future.

Collectively, the Eftel and Dodo Directors and their associated entities control approximately 88 per cent of all Eftel Shares on issue.

The acquisitions are expected to contribute over A$400 million of additional revenue in fiscal year 2013-14. The company expects an underlying earnings accretion of about 20 per cent

The purchase will be funded through a combination of an A$400 million loan and issue of about 19 million M2 shares to Dodo and Eftel shareholders, M2 said.

The transactions are expected to close by May 2013.

Goldman Sachs is acting as exclusive financial advisor to M2 on the acquisitions.