Telecom New Zealand Chief Executive Theresa Gattung today announced plans to acquire 100% of the shares in Australian listed entity, PowerTel Limited.

The plan has been unanimously endorsed by the PowerTel directors and the proposal involves Telecom paying A$2.30* per share in cash by way of a scheme of arrangement.

Telecom has also entered into an option agreement to acquire 10% of PowerTel’s shares on issue from TVG (PowerTel’s major shareholder).  The option may be exercised at a strike price of A$2.30* per share, and is subject to certain conditions.

“This acquisition brings two strongly complementary businesses together and is a step towards the consolidation of the Australian telecommunications industry,” said Marko Bogoievski, Telecom Chief Financial Officer.

“It provides significant benefits to Telecom by enabling AAPT to leverage its investment in service capability and it gives us the scope over time to bring more of our customers onto the combined access network rather than servicing them through wholesale arrangements.

“This is a very positive step for the development of our Australian business,” Mr Bogoievski said.

The A$2.30* offer price represents a 31.2% premium to the volume weighted average price over the last three months and a 18.7% premium to PowerTel's volume weighted average share price over the last 30 days.

The offer represents full value for PowerTel and reflects the underlying improvement in PowerTel's earnings performance and the operating and strategic benefits available from bringing the two companies together.

The transaction values PowerTel at approximately A$357 million including net debt. After adjusting for the company's shareholdings in Macquarie Telecom and iiNet Limited the acquisition price reflects an enterprise value to EBITDA multiple of 7.9x based on A$42m for December 2007 year end.

Telecom anticipates that the acquisition of PowerTel will provide significant value to Telecom shareholders, with the acquisition expected to be EPS-positive within 12 to 18 months. 

The acquisition will be funded by a combination of cash and Telecom's existing debt facilities.

The transaction is subject to certain conditions, these include approvals from the Court, PowerTel’s shareholders and regulatory bodies such as FIRB and ASIC as well as material adverse change and other customary deal provisions. A summary of the key terms and conditions of the Merger Implementation Agreement is attached.

It is expected that the scheme documents will be sent to PowerTel shareholders by late March and that PowerTel shareholders will have the opportunity to vote on the scheme in late April.

If the scheme is approved by PowerTel shareholders and the Court, all shares in PowerTel will be acquired by Telecom and PowerTel will be de-listed.

Citigroup advised Telecom in relation to the transaction.

You’ll see that everything we do is centred on making it simpler for business to communicate with their customers and each other. That’s why we focus solely on business telecommunications. It’s what makes us unique. And it’s how we help our customers streamline their business.

Our suite of solutions has been further enlarged by our acquisition of Request Broadband. Although larger we’re still driven by building clarity and simplicity into innovation. We offer the full range of data, voice and internet solutions for small and medium businesses, corporates, carriers and service providers.

Owning our communications infrastructure gives us control over our destiny and means that our services are of the highest quality, reliability and value. Our extensive business-focussed network comprises both optical fibre and DSL technologies.