M2 takeover offer - Is There Value Here?

Good Evening, Today, we shrugged off both mediocre leads from Wall Street, as well falls in Chinese stocks to start the week with a bang… The big story of the day was one of our growth companies, MTU, which received a merger proposal from VOC At the current premium, we feel that VOC will need to raise its bid……… so could be a “takeover arbitrage” play here…… A few key points: • The deal is all-scrip where M2 shareholders receive 1.625 Vocus shares for each M2 share • Revenue of 1.8bn and EBITDA 370m in FY16E before synergies. Significant synergy potential including cost synergies of 40m per year, expected to be fully realized by FY18 • Combined market in excess of 3bn! • Vocus (VOC) already active in taking over AMM earlier in the year…. Well positioned. • MTU Board unanimously recommended shareholders to vote in favor of the scheme…. • TPG market cap of 8.812B • iiNet market cap of 1.57B We expect a higher bid to come through or a potential "counter-bid" by TPG.... Niv