M2 Telecommunications Group Ltd., a Melbourne-based phone company, will buy rivals Dodo Australia Holdings Pty. and Eftel Ltd. for A$242 million ($251 million) using a mixture of cash and new shares.
The company will sell A$84 million of new shares, equivalent to about 11 percent of its existing market value, and borrow A$409 million to support the deal, it said in aregulatory statement today. M2, which last year spent A$192 million buying Primus Telecommunications Group Inc.’s Australian operations, will refinance A$148 million of Dodo and Eftel debt, it said.
M2 used the Primus acquisition to almost double earnings before interest, tax, depreciation and amortization from a year earlier, to A$52 million in the six months ended December, giving it scope for more acquisitions as Australia switches over broadband services to a state-owned wholesale network. Dodo has 400,000 customers, while 130,000 services are operated over Eftel, according to a company presentation.
“The acquisitions are an excellent complement to our consumer division,” Geoff Horth, chief executive officer, said in a statement. “Our business possesses an excellent capability to grow our share of both the consumer and small to medium business markets.”
Goldman Sachs Group Inc. will provide a A$400 million loan facility for the transaction, consisting of a A$315 million three-year loan and an A$85 million revolving loan and letter of credit, the company said in a statement. M2’s net debt of A$116 million was 1.41 times its Ebitda at the end of December, according to data compiled by Bloomberg.