MTU - M2 Group

[VSntchr]

M2 definitely under-performing the market since the release of the FY15 accounts. The result looked pretty good to me and guidance was fairly solid. They did speak about competition intensifying....but as the low cost provider - wouldn't this result in MTU gaining a bit of a preference over TPG? Doesn't seem to be the case as TPG is holding up alot better in the last few days.

 

[VSntchr]

Interesting move this morning on the market with VOC and MTU announcing a scheme arrangement to merge. MTU holders to receive 1.625 VOC for every MTU share held.

Initial thoughts:

• MTU holders also have an ex-div on Friday.
• In the approval of TPG/IIN, the ACCC warned that any further consolidation of the sector would attract much further scrutiny. That was likely with reference to something like TPG/MTU merging...but MTU/VOC would still be quite relevant.
• $6.49*1.625 is a nice premium on current market price for MTU holders!

 

[skc]

Interesting move this morning on the market with VOC and MTU announcing a scheme arrangement to merge. MTU holders to receive 1.625 VOC for every MTU share held.

Initial thoughts:

• MTU holders also have an ex-div on Friday.
• In the approval of TPG/IIN, the ACCC warned that any further consolidation of the sector would attract much further scrutiny. That was likely with reference to something like TPG/MTU merging...but MTU/VOC would still be quite relevant.
• $6.49*1.625 is a nice premium on current market price for MTU holders!

- I had a signal to trade MTU long and short some other Telco last week. But I declined!
- I am very surprised that VOC/MTU could move so soon after AMM deal - ink's barely dry.
- It's official... pairs trading in the Telco sector is down to the final 3 or 4 companies.
- I can't believe MTU traded at square to the offer near open. I shorted it
- I didn't short enough of it :bad:
- I couldn't find any explicit mention of the dividend coming up for MTU in the agreement... anyone?
- I am sure someone intelligent here has mentioned about MTU being the target.

 

[skyQuake]

- I had a signal to trade MTU long and short some other Telco last week. But I declined!
- I am very surprised that VOC/MTU could move so soon after AMM deal - ink's barely dry.
- It's official... pairs trading in the Telco sector is down to the final 3 or 4 companies.
- I can't believe MTU traded at square to the offer near open. I shorted it
- I didn't short enough of it :bad:
- I couldn't find any explicit mention of the dividend coming up for MTU in the agreement... anyone?
- I am sure someone intelligent here has mentioned about MTU being the target.

Wording on the div is unclear. It seems that any newly announced div wont make the cut. But MTU's old is already announced so it should be fine?

On the corp governance side, I am very happy aussie co's havent been having mysterious run-ups before these announcements. Well done ASIC!

 

[skc]

Wording on the div is unclear. It seems that any newly announced div wont make the cut. But MTU's old is already announced so it should be fine?

On the corp governance side, I am very happy aussie co's havent been having mysterious run-ups before these announcements. Well done ASIC!

Yes you'd have to assume that the deal isn't adjusted for this old dividend.

You got to give it to VOC though... a few months back, MTU share price was worth ~2x that of VOC. Pre-annonucement however the ratio has reduced to ~1.3x. Great timing!

 

[craft]

Great timing!

On the corp governance side, I am very happy aussie co's havent been having mysterious run-ups before these announcements. Well done ASIC!

Relative strength of the market price over the last few years. (sorta tracked each other though MTU has paid lots more in Divs over the period).


Seems a lot of this 'fortunate' movement just prior to transactions is happening lately - Makes you wonder if the timing on transactions are reactionary to otherwise unrelated market movement or is there some manufacturing of good timing going on?

Sold out of VOC a few years back for way less then I'll be effectively buying back on this proposal. Better buff up on what's been going on over there I guess.

Once ACCC effectively closed off any Optus option theirs probably not a better alternative. I guess we'll find out shortly if there is.

 

[McLovin]

Sold out of VOC a few years back for way less then I'll be effectively buying back on this proposal.

You too ay. I sold out at about $2.60ish from memory. I remember at the time thinking they just weren't getting the traction they were talking up. Of course as soon as I sold the thing went off like a rocket and they bedded down their acqusitions.

 

[Ves]

I believe the rationale behind the merger is a good idea. It shores up the 4th Telco spot in the Australian market (unlikely there will be any further major corporate activity now).

VOC's cash flow and balance sheet strength is also a bonus for MTU. I had the feeling that MTU's balance sheet was starting to get inflexible / stretched after the latest round of acquisitions.

The merger also fills in some of the infrastructure gap for MTU, reduces their cost base further, and creates synergies. VOC has more exposure to corporate / government clients, and merging with MTU gives them more exposure to the retail sector through which they can leverage their infrastructure.

I'm not 100% sold on the reliability of VOC's earnings going forward (but in all fairness I'm not overly familiar with the business at the moment). However, on a basic look through, it doesn't strike me as an unfair deal for MTU shareholders, and at least a scrip offer gives continued exposure to the business for those who keep holding.

 

[craft]

For a long time I thought the MTU roll-up of customers would eventually come to rest with Optus.
But the ACCC pre-emptive statement following the TPM-IIN deal put paid to that. So locked out of the customer acquisition via purchase game not only do Optus get to watch MTU slip into the hands of VOC but yesterday TPM also rubbed salt into the wound by switching a big chunk of Wholesale customers away from Optus to Vodaphone. I wonder what Optus’s global perspective on Aus is at the moment?.

Can’t help but think ACCC has changed the course of events. From a selfish perspective it would have been nice if Optus hadn’t been benched by the umpie before they even got a kick. The dance for the last big customer base could have got interesting – but instead the umpire blows the whistle and a lightweight picks it up uncontested. But on the upside the VOC/MTU combination could still be an interesting challenger business to stay exposed too. (undecided yet)

 

[craft]

Re: MTU - M2 Telecommunications Group

??

Depends on your perspective,

View attachment 52385

Can't have businesses like MTU to easy to hold onto or everybody would be rich!

Farewell MTU - Under the scheme of arrangement with VOC it traded for the last time today.

An update of the 10 year total return graph pretty much says it all. 10K to 900K+




If you follow the business these companies can be found and ridden for long periods (and not just in hindsight.)

 

[helpme]

M2 is worth around 2.25B before trading halt (9Feb2016). Vocus is worth around 1.71B today. After merger, M2 shareholders get 1.625 Vocus shares. Therefore, merger values M2 at 2.78b. M2 shareholders is going to make a gain of 23.5% based price before halt? Is this correct? Thank you.

 

[skc]

M2 is worth around 2.25B before trading halt (9Feb2016). Vocus is worth around 1.71B today. After merger, M2 shareholders get 1.625 Vocus shares. Therefore, merger values M2 at 2.78b. M2 shareholders is going to make a gain of 23.5% based price before halt? Is this correct? Thank you.

Unfortunately it doesn't work that way. You need to look at the transaction on a per share basis.

MTU had 184.7m share on issue... so VOC would issue 1.625 x 184.7m ~300m new shares for MTU holders. These 300m new VOC shares have a value of ~$2.2B, which is exactly what MTU was worth on it's last day.

 

[helpme]

Unfortunately it doesn't work that way. You need to look at the transaction on a per share basis.

MTU had 184.7m share on issue... so VOC would issue 1.625 x 184.7m ~300m new shares for MTU holders. These 300m new VOC shares have a value of ~$2.2B, which is exactly what MTU was worth on it's last day.

Thank you for your reply.

Can I calculate in another way? VOC is worth $7.34 per share today. Therefore, MTU is worth 1.625 x 7.34 = $11.93. Suppose someone buys MTU at $12.42. At today's price, he has made a loss of 3.95%. Is this correct?

By the way, is this acquisition fully funded by VOC shares? No cash involved? I don't see any cash being mentioned in the news release. I wonder when one can receive the VOC shares. With MTU halted, seeing VOC dropping without the option to sell out can be scary.

 

[skc]

Thank you for your reply.

Can I calculate in another way? VOC is worth $7.34 per share today. Therefore, MTU is worth 1.625 x 7.34 = $11.93. Suppose someone buys MTU at $12.42. At today's price, he has made a loss of 3.95%. Is this correct?

Yes that is the correct calculation, but the prices you've used are not correct.

The last day of MTU trade was 8 Feb, where VOC closed at $7.45. So the implied value of MTU shares = 1.625 x $7.45 = $12.11. Compare that to where MTU closed @ $12.17. The difference is only ~0.5% and can be due to a range of factors involved in the closing match.

By the way, is this acquisition fully funded by VOC shares? No cash involved? I don't see any cash being mentioned in the news release. I wonder when one can receive the VOC shares. With MTU halted, seeing VOC dropping without the option to sell out can be scary.

All script. It's never a good thing to lose control of your holding and certainly worse during a negative volatile period. If you are trading for the short term this is a situation that is best (and easily) avoided. However, if you are investing in the long term it's probably a small enough risk no worth concerning about imo.

 

[System]

On February 23rd, 2015, M2 Group Ltd (MTU) was removed from the ASX's official list in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement between the Company and its shareholders in connection with the acquisition of all the shares in the Company by a wholly owned subsidiary of Vocus Communications Limited.