M2 Group is set to acquire New Zealand's third largest Internet Service provider, Call Plus, for $245 million.
The group has entered into binding agreement to acquire 100 per cent of both Call Plus Group and related entity, 2Talk Limited (collectively named Call Plus).
Call Plus provides broadband and fixed voice services, servicing a growing base of more than 400,000 services across consumer, business and wholesale market segments.
The Slingshot and Orcon brands spearhead Call Plus's consumer offerings aimed at the SMB market.
Management expects the acquisition to contribute in excess of NZ$250 million revenue and NZ$45 million EBITDA in FY16, implying an EBITDA valuation multiple of approximately 5.6 times.
M2 will fund the acquisition and refinance existing debt through a new fully underwritten multi-year facilities.
M2 chief executive, Geoff Horth said he was thrilled to bring Call Plus into the fold, at a time when it was delivering strong growth and profitability.
"We have had a long association with Call Plus, as a wholesale supplier to our existing New Zealand operation and recognise many similarities between our businesses in terms of target customers, team culture and a shared philosophy of disrupting and challenging the status quo in our respective markets," he said.
"This is a substantial, highly earnings accretive transaction, which again illustrates M2's commitment to continue to increase returns to our shareholders, via both organic and acquisitive expansion."
He said M2 would maintain Call Plus as a self-contained operating business, thus presenting minimal integration risk or distraction to M2's aggressive growth ambitions in Australia.
"The existing Call Plus management team will continue to lead the business, under the local leadership of Mark Callander, Call Plus's long term CEO," he said.
"We look forward to welcoming the Call Plus team to the M2 Group and Mark to our executive team,” continued Mr Horth."
The acquisition is expected to complete on or before 30 June 2015 and is subject to approval by the NZ Overseas Investment Office and other customary conditions.
Goldman Sachs is acting as exclusive financial adviser to M2, and Allens is acting as legal adviser, in relation to the acquisition.