AGL may renew Vocus bid

AGL may return to its bid for Vocus given uncertainty over EQT’s offer for the telco, analysts say.

AGL CEO Brett Redman

AGL Energy may return to its bid for telecommunications provider Vocus given market uncertainty over rival suitor EQT’s offer, RBC analysts say.

The power giant said today it had withdrawn a non-binding indicative offer for Vocus after it was unable to agree due diligence terms.

Swedish private equity giant EQT Infrastructure has already lobbed a higher $3.3 billion bid for the telco player, offering $5.25 a share, which would be implemented by way of a scheme of arrangement.

Vocus said earlier this week that EQT’s proposal was subject to a number of conditions and that the due diligence was likely to take a number of weeks.

With Vocus trading at $4.57 compared with the offer price of $5.25, the door could still remain ajar for AGL according to the broker.

“With Vocus currently trading 13 per cent below EQT’s indicative proposal, we will continue to see how this develops with the market discounting the chances of a binding bid being forthcoming, there is a chance that AGL may be able to return,” RBC analyst James Nevin said.

AGL said it had recently contacted Vocus with a confidential, non-binding indicative offer, seeking access to due diligence materials so it could determine whether to make a binding offer for Vocus.

It withdrew its offer after it was unable to agree to due diligence terms.

The power retailer said today it would continue to assess opportunities to support its strategy, after saying in February that it was mulling growth options to meet the needs of customers, as energy and data value streams converge.

RBC said it was wary of AGL making a big one-off acquisition into the telco sector.

“While we think there is going to be a natural progression for the utility industry to provide more in home services and management of in home devices and energy usage, we see this as an evolution over time that AGL can potentially manage organically,” Mr Nevin said.

“We would prefer to see AGL make the incremental steps along the path it laid out at its recent results rather than jumping to the end of that path through an acquisition.”

AGL shares down 1.1 per cent to $20.44 and Vocus off 0.9 per cent to $4.57.

Suitors have been circling Vocus for several years. In late 2017, competing private equity firms KKR & Co and Affinity Equity Partners ended talks with Vocus after each found it couldn’t support a takeover offer on terms that were acceptable to the telecom company’s board.

Vocus owns telecom networks in capital and regional cities in Australia and New Zealand, with a portfolio of brands focused on a range of corporate, small business, government and residential customers. Over the last couple of years, the company has shifted from a concentration on fibre-networks on Australia’s east coast to a broader range of telecom operations across the two countries, other products including television and insurance services, and retailing electricity and natural gas.

AGL, which operates the largest electricity-generation portfolio in Australia, in February said it was assessing growth opportunities to meet the needs of customers as energy and data streams continue to converge.

Today, it said that in recent months it had been assessing potential investments to support this strategy, and that it would continue to assess opportunities.

With Dow Jones Newswires