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M2 pays $19m for Commander SMB

Telco retailer and wholesaler M2 has acquired Commander's small and medium business brands and assets for around $19 million, but not Commander's network infrastructure.
Written by Liam Tung, Contributing Writer

Telco retailer and wholesaler M2 has acquired Commander's small and medium business brands and assets for around $19 million, but not Commander's network infrastructure.

Assets acquired under the $19 million deal include existing contracts, the "Commander" brand, and its other brands Australia Star, Call Australia and Newtel. It has also agreed to take on Commander's Adelaide operations centre, software, operating systems and equipment, excluding network infrastructure. The figure does not include inventories M2 agreed to acquire.

Managing director and chief executive Vaughan Bowen told ZDNet.com.au that M2 intended to take on a "sizable number" of Commander employees from its Adelaide operations centre following the completion of the transaction, which is expected in the next two weeks.

"We're still finalising what will be the exact number of personnel. All I can say is it will be a sizable number," said Bowen. He declined to disclose current headcount at the Adelaide operations centre.

"And we will be taking on Commander's small and medium business as a going concern. We intend to make employment offers to a large number of the existing team because the operations centre is working well," said Bowen.

However, staff working for Commander's enterprise client base and its network infrastructure staff would not be included amongst those M2 is considering to take on.

M2 said the acquisition should leave the company with annual revenues of around $360 million, which was recently bumped up by its $17 million acquisition of People Telecom in December 2008. "Before the Commander deal we had been running at $260m with People Telecom incorporated. This should add around $100m to that," said Bowen.

The deal should leave its wholesale relationships with Telstra and Optus unchanged, according to Bowen, since the deal did not include Commander's network infrastructure, which gave it a carrier status.

"Network services will be transferred into our existing wholesale relationships. We have a strong mobile relationship with Optus and large scale relationship with Telstra in fixed line," said Bowen.

An initial payment of around $12 million for Commander will be funded through bank finance, said Bowen, with a deferred settlement "in the order of $7 million" to be paid out of M2's working capital. "The deferred settlement will be paid out of positive cash flows," said Bowen.

The deal puts an end to the receivership process of this part of Commander's business overseen by McGrath Nicol since August 2008. It's also the second acquisition by M2 of Commander assets. In February 2008 it paid $10 million for Commander's Unitel business.

M2's share price closed at 57 cents yesterday and had risen to 66 cents at 11:42am today.

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