Mitchell Bingemann | December 05, 2008
M2 Telecommunications has made an offer to acquire People Telecom in a combined stock and cash deal worth about $17 million.
Under the terms of the acquisition, People Telecom shareholders will receive 0.09 M2 shares for every People Telecom share as well as 69 cents per share in cash.A bonus of 34 cents per share will also be paid given People Telecom's net cash balance reaches agreed upon levels.
M2 managing director Vaughan Bowen said the acquisition of People Telecom would add considerable scale to M2’s operations and around $85 million in annual revenues to its balance sheet.
“The addition of People to M2’s strongly growing customer base is expected to increase group revenues to greater than $250 million on an annualised basis and is expected to considerably increase consolidated earnings and earnings per share,” Mr Bowen said in a statement to the Australian Securities Exchange.
The People Telecom board has recommended its shareholders approve the takeover at the company's general meeting in March 2009. Mr Bowen said People Telecom will continue to run as an independent arm of M2 if the deal goes ahead.
“We believe that this transaction represents the most effective means by which shareholders can realise maximum value," People Telecom chairman Barry Hamilton said.
M2’s acquisition of People Telecom is its second takeover for the year. In February M2 acquired Commander’s wholesale group Unitel for $10 million.