Australian telco Vocus entertains $2.3 bln offer from Sweden's EQT
* Swedish PE firm EQT Infrastructure lobs offer for Vocus
* Struggling telco in midst of turnaround
* Shares soar to two-year high, but hold under offer price
(Recasts on infrastructure with fresh shareholder and analyst
By Ambar Warrick and Tom Westbrook
BANGALORE/SYDNEY May 27 (Reuters) - Australian telecoms
junior Vocus Group Ltd on Monday said it received a
A$3.3 billion ($2.3 billion) buyout offer from Swedish
private-equity firm EQT Infrastructure, just as the firm's
fibre-focused turnaround plan begins to gain traction.
The non-binding offer sent Vocus shares soaring by a quarter
and vaulting over where they traded in 2017 when U.S. buyout
firm KKR & Co Inc and Affinity Equity Partners made,
then abandoned, their own plays for the struggling telco.
EQT made a cash offer of A$5.25, Vocus said. That was a 35%
premium to Friday's closing price and A$1.1 billion bigger than
KKR and Affinity's separate but matching bids, underscoring
confidence in the telco's path away from discount retailing into
"It's a great price," said independent telecoms analyst Paul
Budde. "Vocus has been struggling a bit for the last couple of
years (but) the assets that they have are definitely
"(The bid) is not necessarily for the business or the
customers that they have ... but that infrastructure is always
something that is worthwhile and they have got quite a lot of
Vocus, in a stock exchange filing, said its board has
allowed EQT to conduct non-exclusive due diligence. It gave no
view on the offer.
EQT was not immediately available for comment.
Shares of the telco jumped as much as 26 percent after the
announcement, hitting a two-and-a-half-year high before drifting
lower to A$4.59 - still well below the offer price, suggesting a
degree of doubt about whether a deal will materialise.
The broader market was flat.
Sydney-based Vocus, Australia's fourth-largest internet
provider, fell into a downward spiral in 2017 and 2018, cutting
and missing profit forecasts as its retail businesses battled
falling profit margins and increasingly stiff competition.
The same forces are driving competitors TPG Telecom Ltd
and the local arm of Britain's Vodafone Group PLC
to pursue a A$15 billion merger.
Both KKR and Affinity dropped their approaches for Vocus,
without explanation, four days after Vocus issued a third profit
warning in nine months back in August 2017.
Since then, Vocus has shifted focus to network
infrastructure, owning and developing fibre-optic cables in
Australia, New Zealand and the Pacific. Under the strategy,
revenue in the division grew by almost a third over the six
months to Dec. 31.
"Where the retail market is still very tough, trying to
fight against the big guys, that infrastructure-based commercial
business seems to have a few different dynamics," said Jason
Beddow, chief executive officer of A$5.3 billion fund manager
Argo Investments Ltd and a shareholder of Vocus.
EQT, which is backed by Sweden's industrialist Wallenberg
family, has mostly focused in Europe and North America. In 2014,
it bought Australian medical diagnostics firm I-Med, selling out
in 2018 for A$1.25 billion.
Beddow said it was too early to comment on EQT's Vocus
proposal because it was not binding. Vocus said it expects the
due diligence process to take weeks and that a formal, binding,
bid may follow.
($1 = 1.4428 Australian dollars)
(Reporting by Ambar Warrick and Aditya Soni in BENGALURU and
Tom Westbrook in SYDNEY; Editing by Himani Sarkar and
First Published: 2019-05-27 01:47:37
Updated 2019-05-27 06:11:17
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