Telecom New Zealand has ended speculation over its intentions towards the Australian carrier AAPT by announcing a $A5.10 takeover offer for the company.
The offer will be for all of the AAPT shares that Telecom NZ Australia does not already own. However, Telecom's aim is to increase its shareholding while maintaining AAPT as a major listed Australian telecommunications carrier.
The offer price values AAPT at about $ A 1.5 billion. The offer will be subject to a number of conditions as set out in the attachment. Telecom NZ Australia currently owns about 19.8% of the shares of AAPT.
"Telecom's international strategies include growing our trans-Tasman business. AAPT provides Telecom with facilities-based participation in the fast-growing Australian market. Increasing our shareholding should enable both Telecom and AAPT to achieve key strategic goals sooner than if they were to proceed independently," Telecom CEO Roderick Deane said.
All AAPT shareholders will have the opportunity to sell some or all of their shares under the offer. But Deane said that Telecom would prefer that AAPT remained listed on the Australian Stock Exchange.
"We would like to maintain a widely held register with institutional and smaller investors accounting for a substantial proportion of the shares on issue," he said.
"We fully expect that many shareholders will continue to hold their AAPT shares and benefit from the potentially significant synergies that are expected to emerge between Telecom and AAPT. This offer aims to provide an opportunity for those shareholders who would like to sell all or part of their shareholdings for their own personal liquidity or other reasons."
Dr Deane noted that: "The share price of AAPT was $4.85 on 30 August, prior to the run up of the last two weeks that appears to have been prompted by speculation about Telecom's intentions. The offer therefore represents a 5% premium to the underlying share price that prevailed before this speculation."
Telecom began acquiring AAPT shares in May 1999 and since then the two companies have had numerous discussions which sought to resolve a basis for Telecomto increase its shareholding percentage. Deane said that the realisation of synergies between Telecom and AAPT improves with a higher level of equity interest.
"The relationship will enhance the global competitiveness of both parties and we anticipate a number of operational synergies," he said.
Telecom expects the synergies might include:
• Joint management of Australia-New Zealand voice traffic, and more efficient use of international bandwidth.
• Potential to leverage off common systems and infrastructure, knowledge sharing and joint buying power.
• Enhanced service offering for Australia-New Zealand corporates and a broader offering for AAPT's corporate customers.
• Potential to jointly develop each company's Internet operations.
• Potential for roaming on each company's proposed CDMA network.
"A relationship of this kind should enable Telecom and AAPT to achieve key strategic goals more rapidly and provides a framework to maximise benefits from the convergence of the New Zealand and Australian markets," Deane concluded.