Vocus boss expects $3.5b Macquarie-led takeover will strengthen telco’s hand

Vocus Group boss Kevin Russell says the telco is better placed to win a bigger slice of the market under private ownership, with the takeover target’s board backing the $3.5 billion bid lobbed by Macquarie’s infrastructure fund and Aware Super.

Macquarie Infrastructure and Real Assets (MIRA) lobbed its indicative bid for Vocus in February and was subsequently joined by the superannuation fund to pore over the telco’s books.

Vocus Group managing director and chief executive Kevin Russell.Credit: Rhett Wyman

The scheme implementation deed agreed to between Vocus and the suitors will see an entity owned by the MIRA/Aware Super consortium buy all Vocus shares at $5.50 a share. The offer, at a 25.6 per cent premium to the telco’s closing price of $4.38 a share on February 5, has been warmly welcomed by its management, with Mr Russell saying it offers the telco a chance to maximise the potential of its fibre networks.

“Vocus being taken into a private status instead of a public status is interesting,” he said.

“It gives us a bit more flexibility to invest strategically, without the scrutiny of short-term targets, which I think is advantageous at a time when we are entering a critical investment space. It’s critical for us to look for strategic infrastructure investment opportunities, a private company is more conducive to making these investments.

“MIRA and Aware are smart long-term investors, they will bring balance sheet strength, access to capital. They are strong shareholder names that enhance the credentials of Vocus and give credibility to our ability to fund future expansion opportunities.”

Vocus shares closed Tuesday’s session 8.6 per cent higher at $5.43, the highest they have been since mid-2016.

Vocus operates over 30,000 kilometres of fibre across major Australian cities and the fibre business, which delivered $128.7 million in earnings in the most recent half year, is seen as the key asset being sought by its suitors.

However, the deal, which is subject to an independent expert’s report, does bring a level of uncertainty for Vocus, especially around its plans to list its New Zealand operations.

Vocus had been working on an initial public offering of the business, with the float scheduled for the 2020-21 financial year.

Mr Russell said the process had been put on hold for the time being.

“There are two paths now, we either IPO a little bit later or we pursue consolidation opportunities with funding coming from (MIRA and Aware).”

The other conjecture in the market is about whether Vocus’ new owners will cut loose the telco’s retail broadband businesses – Dodo and iPrimus.

Telecommunications analyst Ian Martin said that the consortium will take its time to evaluate the long-term future of Dodo and iPrimus.

“The retail [business] is not where the interest is, I wouldn’t be surprised if they sold it, they are not driven to sell it, so I don’t expect a fire sale.”

“The outlook for the retail business is a lot less clear than that of the network services business,” he said.

Mr Martin added that the fibre network is primed for growth in the post-pandemic environment.

“Infrastructure is the place to be, you are going to see a lot more growth in this market as businesses move more of their operations online.”

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