Vocus targeted for $3.3bn takeover by private equity

Shares in Australia’s fourth biggest telco, Vocus, surge after a $3.3bn offer from Swedish private equity giant EQT.

Vocus CEO Kevin Russell. Picture: Hollie Adams

Vocus Group has confirmed it is back on the radar of suitors, with Australia’s fourth largest telco receiving a $3.3 billion indicative takeover offer from Swedish private equity giant EQT.

The $5.25 a share offer will be implemented by way of a scheme of arrangement. The proposal is subject to a number of conditions and Vocus said the due diligence is likely to take a number of weeks.

“The board notes that there is no certainty that this process or the indicative proposal will result in an offer for Vocus,” the telco said.

“Vocus shareholders do not need to take any action in response to the indicative proposal at this time.”

Vocus shares rose as much as 22 per cent before falling back to be up 17 per cent at 2pm (AEST).

Resumed takeover interest in Vocus was reported by The Australian today.

EQT’s offer highlights the appetite of the Swedish buyout giant for Australian assets. The company is best known locally for its sale of medical imaging and radiology group I-MED for $1.25bn last year.

It was also reportedly keen to pick up aged care business Allity, but after giving that a miss has opted to make a pass at Vocus.

EQT this month picked up Maltese telecom operator Melita Limited from Apax Partners and Fortino Capital. The financial details of the deal were not disclosed.

Vocus, which is being advised by UBS, is no stranger to interest from private equity operators, having already opened it books to Kohlberg Kravis Roberts and Affinity Partners, in 2017.

Both suitors subsequently lodged $3.50 a share offers, which were knocked backed by Vocus.

The telco has since undergone a significant makeover of management and is slowly recovering from the disastrous merger with M2 Communications.

The $3.8bn merger sealed in 2016 was undone by integration problems that eventually led to a series of profit downgrades and significant destruction in shareholder value.

The telco is currently trading at $3.89 a share with the market by and large pleased with the direction Vocus has taken since former Optus and Telstra senior executive Kevin Russell was appointed CEO in May last year.

Vocus’s fibre infrastructure, which stretches across the eastern cities and Western Australia, is the telco’s prized asset, with analysts highlighting the potential it gives the telco to score customers in the enterprise and wholesale market.

Offering competitively-priced solutions for mid-sized companies gives Vocus a chance to steal market share from Telstra and the telco can also potentially grab a better slice of the government market, according to analysts.

However, any takeover process will have to consider the prospect of some of Vocus’s other business units, especially its small to medium business-focused Commander brand. Its consumer business is also under pressure as the National Broadband Network (NBN) continues to hollow out its margins.

Vocus’s retail business was written down by about $1 billion in 2017 and despite a revamp of the Dodo brand, there’s speculation that Vocus has been looking to offload its consumer business.