Vocus CEO remains confident despite share price fall as another private equity suitor walks

Vocus’ CEO remains upbeat despite a share price plunge in the wake of another suitor walking.

“There are people who are interested in acquiring Vocus as a business,” says Vocus Group CEO Kevin Russell. Hollie Adams/The Australian

Shares in Vocus, Australia’s fourth biggest telco, have dived after its latest engagement with a private equity suitor came to naught. However, the telco’s boss Kevin Russell is confident that Vocus’s network assets still make it an attractive target.

Swedish equity firm EQT, which lobbed a $3.3 billion indicative offer for Vocus last week, has opted against lodging a formal binding offer.

Vocus (VOC) shares slid almost 18 per cent on the news to $3.77, well short of the $5.25-a-share offer pitched by EQT. They closed at $4.58 on Tuesday.

They were trading at $3.89 before EQT’s offer was made public.

EQT walked away after a rapid fire dive into Vocus’s books and its withdrawal follows AGL Energy’s decision to steer clear of a bid for the telco.

Vocus’s previous talks with KKR & Co and Affinity Equity Partners in 2017 also didn’t lead to binding offer for the telco.

Mr Russell told The Australian that Vocus is in a much better position now, compared to when KKR and Affinity pored over its books, and the interest from EQT and AGL was a sign that ts turnaround strategy was being appreciated in the market.

“The business has a new management, it has a clear strategy to move forward and there is increasing credibility given to that strategy in the market place.”

“There is also increasing recognition of the value of Vocus’s network assets and there’s a real market opportunity for a dedicated fibre operator that’s fixated on gaining a market share through good service.”

“The result of that is there are people who are interested in acquiring Vocus as a business,” he said.

EQT’s withdrawal consigns Vocus’s management back to its original refresh plan and Mr Russell said that the end of the takeover process came down to timing.

“We engaged on short notice (with EQT) for an intense period and came to view that now wasn’t the right time.”

“We are in the early stages of our turnaround, the team has barely been assembled, we are in the embryonic stages of the turnaround and for someone coming in looking at us will see the market opportunity, the quality assets and a cracking team,” he said.

Deutsche Bank analyst Anthony El-Khoury, who has maintained his hold rating on Vocus, said the telco is likely to remain on the radar of prospective suitors.

“While we’re not entirely surprised with the decision to cease discussions, we view this as an incremental negative for Vocus, as it has now received 4 unsuccessful bids in the last two years; KKR, Affinity, EQT, & AGL Energy,” he said in a client note.

“We note, despite EQT withdrawing its offer, we believe takeover interest remains in Vocus, and therefore now incorporate a 15 per cent takeover premium to our blended pre-bid valuation, to arrive at a revised price target of $3.90 a share.”

Vocus is now set to provide more information on its turnaround plan at an investor strategy day scheduled for the last week of June.

The telco posted a 29 per cent drop in underlying net profit after tax of $48.8m for the first half of fiscal 2019. Revenue for the period was flat at $974.2m, with revenue at Vocus’s consumer and SMB units sliding 12 per cent and 27 per cent respectively.