Vocus still ripe for picking despite EQT’s withdrawal

Swedish private equity group EQT’s withdrawal of its bid for Vocus opens the door for AGL Energy to have another tilt at the telco. Picture: iStock

Swedish private equity group EQT may have been quick to drop its pursuit of Vocus Group but the telco is still firmly on the takeover radar, with both management and market watchers confident of future overtures.

But just how long it will take before another offer crosses the desk of Vocus’s management remains to be seen, especially if EQT’s accelerated due diligence process and its swift withdrawal is any indication.

It seems EQT is on a mission to acquire telecos after it recently bought Maltese telcom operator Melita — the leading services provider in Malta.

Vocus’s earnings Note: Figures have been rounded

Vocus boss Kevin Russell, meanwhile, has been putting the pieces together at the telco but the turnaround strategy in his own words is still “embryonic”, which may explain why EQT’s initial pitch of $5.25 a share failed to spark a bidding war for the telco.

Vocus’s earnings Note: Figures have been rounded

Rather than get entangled in a messy rescue act, prospective suitors are willing to let Russell and his new-look team keep doing the heavy lifting. It’s a task that Russell has taken to with much gusto and more details on the turnaround should hit the market by the end of this month.

Vocus’s second largest shareholder, Greencape Capital, is happy to play the long game, it clearly trusts Russell’s road map, and the recent flurry of interest would indicate that Vocus has something the market wants.

Vocus’s earnings Note: Figures have been rounded

While Vocus’s core asset, its extensive fibre network infrastructure, is an attractive property in the market, the overall business is still in need of a fix. The consumer broadband business (Dodo and iPrimus) and the Commander business are under intense pressure in a competitive market and would almost certainly be divested under private equity ownership.

For now Vocus isn’t keen to get out and put Dodo and iPrimus on the block, which is understandable given the distinct lack of buyers.

Even if a telco was tempted to pick up the brands, the competition regulator may have a few things to say about any prospective deal.

EQT’s withdrawal does open the door for AGL Energy to have another tilt at Vocus, especially if the power retailer’s boss Brett Redman is serious about diversifying its offers to the market. In an environment where the logic of owning the customer through bundled offers (power, internet, and media) is gaining primacy, industry sources told DataRoom that AGL may look to put its hefty balance sheet to good use and have another go at stepping out of its comfort zone.

The telecom-energy retail convergence is not without example in the local market, with amaysim (another prospective takeover target) proving that the model can work.

Vocus was advised on the indicative offer by UBS and Allens, while JPMorgan and KWM were working with EQT.