Vocus Group is believed to be working on a counter bid for broadband telecommunication network provider Uniti following a $3.06bn proposal put forward by Morrison & Co.
Sources in the market say that Vocus, owned by Macquarie Infrastructure and Real Assets and Aware Super, is preparing its own offer for the company.
However, the telecommunication provider will have to wait four weeks to gain access to a data room after Morrison & Co struck an agreement for exclusive negotiations and access during that time.
That is unless Uniti pays Morrison a $5m break fee, as agreed in the exclusivity terms.
Some also question how much Vocus would be prepared to pay, where an offer an offer of $5 per share would not make much sense for the group at a time its new owners are busy bedding down the operation.
Yet there are Uniti investors that say that Morrison’s offer of $4.50 per share is not enough for the group and they believe only at $5 does it start to get interesting.
They argue Vocus would be able to extract more synergies than Morrison or any other pure financial buyer.
Vocus provides wholesale, business, government and consumer telecommunication services across Australia and New Zealand and manages Australia’s second largest intercapital fibre network.
It was purchased by MIRA and Aware last year for $3.5bn.
Others believe that Kohlberg Kravis Roberts will be looking, given the mammoth amount it has raised for its latest infrastructure fund, while another suitor could be TPG Telecom, although others are doubtful it would emerge as a buyer.
TPG has fibre assets which could carry Uniti traffic and their fibre to the premises business is similar to the service that Uniti offers.
Some believe it is an interesting move for Uniti not to appoint an investment bank as a defence adviser, but sources believe that not far from the action somewhere is likely to be Grant Samuel, which has a close relationship with Uniti management.
Bank of America could also have a role somewhere, potentially for another bidder, given it is also close to top Uniti executives.
Analysts at Ord Minnett and JPMorgan are also not ruling out a higher bid from another party and believe the offer looks fair.
Ord’s said that the valuation metrics for Morrison & Co’s $3.06bn offer for the company lobbed on March 13 are in line with other deals in the industry.
The offer is a 16 per cent premium to Ord Minnett’s price target and at 23.6 times the earnings the analyst forecasts for Uniti during the 2022 financial year including the company’s debt.
It is 19.8 times for the following year.
Ord Minnett said recent telco infrastructure transactions have ranged between 15.5 times and 28 times forecasted earnings.
The analysts said they believed that the quality of Uniti’s private fibre assets – a 290,000-plus premise pipeline and high margin network revenues – validate a multiple at the mid to upper end of this range.
The analysts said that Morrison & Co’s underlying financial clients are likely to hold a cost of capital advantage compared to public markets, supporting their willingness and capacity to pay a premium for Uniti.
Ord’s estimates synergies of between $9m-$15m per annum by transferring a share of Uniti’s backhaul fibre requirements onto a third party network.
The analysts added its discounted cash flow valuation rises to $4.05 per share from $3.88.
The bid price also represented a 44 per cent to 49 per cent premium to the sector, Ords said.
Morrison & Co, advised by Record Point, manages $20bn of assets on behalf of sovereign wealth and pension funds, having acquired a minority position in Telstra’s tower assets in 2021.
It also owns Vodafone New Zealand with Brookfield.
Uniti builds broadband telecommunication networks to go into new communities and multi dwelling residential properties.
It also sells telecommunications products and services, including broadband, on a mixture of owned wireless infrastructure and resold fibre access networks.
Unit shares closed at $3.96 on the ASX on Wednesday.
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