Vocus may float part of its New Zealand telco operations

Vocus may spin off part of its NZ operations

Further details are emerging about a possible plan by Vocus to launch an initial public offering of its New Zealand business.

The Australian listed telecommunications provider may be considering a move where it lists half of its New Zealand operations to pay down some of its debt, and retains the rest.

The move could also enable the company to once again offer a dividend to investors.

The game plan for any buyer of the Vocus New Zealand business has always been seen as one where it also secures the No 3 telecommunications company across the Tasman, 2Degrees, and merges it with Vocus New Zealand to reap synergies.

However, the intentions of 2 Degrees owners, including Trilogy International Parnters, remain unclear.

With the business listed in New Zealand, it could still be acquired by a suitor at a later stage.

Private equity firm TPG Capital has been among the groups that has looked at Vocus in the past.

TPG is currently in the process of floating its Asian-based PropertyGuru real estate search firm in Australia and has also been actively looking at the Lion drinks and dairy business in the local market.

However, it is now thought to no longer be a suitor of the Lion assets.

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This column first flagged in June that a possible float of the Vocus New Zealand business was on the cards, along with a sale of its Australian retail assets, which may come for offer before the listing.

Part of the strategy for Vocus is to create a business solely focused on its Australian fibre telecommunications networks.

Investors in the company are lobbying for such a move and investment bank UBS is expected to work on the plan.

Last year, Vocus made attempts to sell its New Zealand assets for $400m and expectations are now that the company could achieve a price of at least $500m.

The Vocus share price has started staging a recovery after it sharply rallied then collapsed on the back of two in bound takeover bids that never resulted in a sale.

EQT Infrastructure mounted a $3.3bn takeover for Vocus shortly before an AGL offer eventuated. However, both walked away after conducting due diligence.

EQT offered $5.25 per share and Vocus shares yesterday closed at $3.48.

For the year to June, Vocus booked a 0.4 per cent lift in its revenue to $1.89bn and a 17 per cent decline in its underlying net profit to $105.5m.

The company’s net debt is now $1bn, with its gearing level increasing to 2.9 times earnings from 2.7 in the previous corresponding period.

Vocus’s debt covenant sits at 3.5 times, but it would be reduced to 3 times by December next year.

Vocus declined to comment.