TPG shares fall on doubts over $6.3bn Vocus deal

TPG and Vocus say a potential infrastructure deal is still alive, but that hasn’t stopped shareholders from doubting.

TPG chief executive officer Inaki Berroeta. Picture: iStock.

Shares in telco giant TPG fell by more than 2 per cent amid uncertainty around a $6.3bn asset sale to Vocus, with the exclusive diligence period expiring.

TPG, Australia’s third-largest telecoms outfit, told its investors on Wednesday that the diligence period had expired but that the parties would continue commercial discussions.

Vocus wants to buy certain TPG’s Enterprise, Government and Wholesale assets and associated fixed infrastructure assets, including Vision Network, which pro­vides broadband access to about 400,000 Australian premises.

“TPG securityholders should be aware that the nature of the transaction involves considerable complexity which needs time to work through and there remains no certainty an agreed transaction will eventuate,” the group told investors on Wednesday.

“If a transaction is to be agreed, it would also remain subject to a range of conditions, including relevant regulatory approvals.”

Shares in TPG fell 2.3 per cent by 3.40pm AEDT.

The companies had previously agreed to extend their due diligence period by about a month. TPG previously said it had received a number of non-binding expressions of interest in its fixed network infrastructure assets.

TPG’s EGW business contributed about 21 per cent of its total revenue for the first half of 2023, according to its most recent financials.

Analysts warned TPG investors in August against gaining “too much exuberance” about the offer from the Macquarie-backed entity.

“In fact, we caution investors against too much exuberance on the offer, given the current economic and credit market volatility, despite what the buyout equity market may suggest,” analysts for Ord Minnett said in a research note.

“After all, Vocus still needs to get debt financing, and due diligence is always a fertile ground to begin the price haggling process.”

Vocus CEO Ellie Sweeney at their offices at Nth Sydney. John Feder/The Australian.

TPG last year sold its mobile towers and rooftop infrastructure to Canadian pension fund OMERS in a deal worth $950m, a move CEO Inaki Berroeta said would help the telco repay its considerable bank debts, which sat at $3.6bn in December.

TPG was the last of Australia’s ‘‘big three’’ telcos to offload its towers arm. Optus sold 70 per cent of its towers business in October 2021 and Telstra that same year netted $2.8bn for the sale of 49 per cent of its telecommunications tower portfolio to Morrison & Co and the Future Fund.

Amid what’s been a flurry of deal-making for the local telco sector, TPG was also forced to abandon a $1.8bn landmark network sharing deal with Telstra after the Australian Competition Tribunal knocked back an appeal.

Vocus is led by chief executive Ellie Sweeney, who in February flagged plans to add to the company’s significant fibre holdings.

Founded by entrepreneur James Spenceley in 2008, Vocus operates Australia’s second-largest intercapital fibre network. It became the nation’s fourth-largest telco following a merger with M2 Group in 2016. Aside from its significant fibre footprint, Vocus operates a number of consumer brands including Dodo, iPrimus and Commander.