The old fashioned calculator looks like a handy tool for holders of Amcom Telecommunications Limited (ASX: AMM) shares over the next month. Amcom shareholders have been offered 0.4614 shares in Vocus Communications Limited (ASX: VOC) for every Amcom share they hold in return for agreeing to a merger of the internet businesses.
The offer of 0.4614 shares in Vocus was calculated on the basis of Vocus having an implied value of $5.31 per share. If you multiply $5.31 by 0.4614 you arrive at the implied value of Amcom shares under the offer, $2.45. However as the share price of Vocus has tracked substantially higher since the terms of the merger were agreed the implied value of Amcom shares has mirrored the Vocus share price higher.
Today Vocus is trading at $6.24, which when multiplied by 0.4614 gives Amcom an implied value of $2.87 per share. Its actual price at the time of writing has risen to $2.92, the slight premium perhaps a reflection of rumoured interest from TPG Telecom Ltd (ASX: TPM) and Vocus' bullish price action.
The upward re-rating of Amcom stock post-announcement potentially makes it now harder (more expensive) for TPG Telecom to come over the top of Vocus with a superior offer. This creates a virtuous circle for Vocus as it receives more investor support and serves as a lesson on the intangible value of competitive strengths and scale. In effect the value of Vocus and Amcom when combined, is greater than the sum of their parts when separated as rivals.
Investors interested in buying a ticket to the fibre-optic future of this potentially combined internet services, data centre and Cloud business now have two options.
First, they could attempt to generate some arbitrage by buying Amcom shares when they are cheaper than the 0.4614 multiple relative to the Vocus share price. Second they can buy Vocus shares, save themselves some paperwork, and presume the deal goes ahead as structured.
Both Vocus and Amcom have climbed more than 4.5% today to $6.26 and $2.95 respectively.
Data centre and dark fibre internet providers aren't the only businesses in growth sweet spots.
