New twist as AGL withdraws offer for Vocus

Australian fibre provider Vocus Group has seen a second potential suitor withdraw a takeover bid for the company in as many months.

AGL Energy, the Australian energy retailer, has withdrawn its non-binding proposal to acquire Vocus less than a month after Swedish investor EQT withdrew its own.

Earlier this month [June 2019], it was announced that AGL had made an Aus$4.85 per share offer – totalling around Aus$3 billion (£1.6bn €1.8bn $2bn) – for the entire share capital of Vocus. Subsequently, the prospective buyer was granted a four-week due-diligence period.

Now, AGL has decided to cease its due diligence and withdraw its proposal, saying it is “no longer confident that an acquisition of Vocus at the proposed terms would represent sufficient certainty” of value creation for its shareholders.

Previous offers

Late last month [May 2019], the company received an unsolicited proposal from EQT at Aus$5.25 per share, or a total of Aus$3.27 billion (£1.7bn €2bn US$2.2bn), for which it was granted non-exclusive due diligence access.

At around the same time, AGL confirmed that it had made a previous pass at a Vocus takeover, though those talks did not materialise due to a failure to agree on terms for due diligence. Following the collapse of EQT’s bid, AGL was granted due diligence, after which it withdrew its own offer.

Vocus’s stock took a steep dive following the announcement, closing at just over 24% down from the previous day. While indicative of dashed expectations of a large pay out, the sharp drop likely also reflects a concern about what may have been uncovered during the due diligence that would send two investors running.

In 2017, KKR made its own non-binding proposal valued at circa Aus$2.2 billion (£1.1bn €1.3bn $1.5bn), which was roughly matched by a rival bid from Asian private equity firm Affinity Equity Partners. Both proposals were eventually withdrawn.

Canada’s Brookfield is understood to potentially be interested in its own bid for the company.

Currently, Vocus has a fibre network of over 23,000km in Australia and 7,000km in New Zealand, as well as connections to Singapore, Hong Kong and the US via undersea cables. Vocus CEO Kevin Russell said that he has great confidence in the three-year turnaround that is in the process of being carried out.

 

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