Vocus to buy Nextgen Networks for $861 million

Telecommunications giant Vocus will buy Nextgen Networks in an $861 million deal that includes Nextgen's stake in two major submarine cable projects.

Vocus is seeking to raise $652 million in capital to fund the acquisition, with the remainder to be covered by existing debt facilities.

The deal is expected to formally close within three months, subject to regulatory approval.

Vocus is offering a combined $807 million upfront to acquire Nextgen as well as the North West Cable System, a development-stage project that will build a 2000km submarine cable from Darwin to Port Headland to support resources customers.

An additional $54 million in deferred consideration is on the table for Nextgen's 50 percent stake in the Australia-Singapore Cable project, should certain undisclosed conditions be met. Vocus and Nextgen late last year announced they would partner to build the 4600km cable connecting Singapore, Jakarta and Perth in a $171 million joint venture.

Taking over Nextgen and its backhaul assets would allow Vocus to round out its largely metropolitan-based infrastructure portfolio.

Vocus CEO Geoff Horth called the Nextgen backhaul “the missing piece in our existing infrastructure network”.

“Owning this critical infrastructure will allow Vocus to connect its metropolitan infrastructure to Nextgen Networks’ inter-capital fibre optic network, thereby connecting mainland capital cities to regional and remote areas on one owned network,” Horth said in a statement.

Horth said the acquisition would strengthen Vocus’ position as the “fourth pillar in Australian telecommunications”.

The company indicated it expected to achieve up to $30 million annually in corporate savings by combining the two companies, arising from economies of scale, rationalisation of premises and third party access tail spend. The merger is estimated to cost $6 million.

Nextgen’s Australian backhaul network links up 70 data centres and 1100 buildings nationwide, with 17,000 km of cable linking capital cities to regional areas.

Vocus has been on an aggressive acquisition spree over the past few years, spending millions of dollars on data centres and and backbone network operators across Australia and New Zealand.

The company merged with Amcom last year before going on to join forces with M2 a few months after. 

The remainder of the Nextgen Group, which includes data centre provider Metronode, will remain 71 percent owned by the Ontario Teachers’ Pension Plan and 29 percent owned by CIMIC.