EQT drops USD 2.3bn offer for Vocus

05 June 2019 - 12:00 am UTC

Swedish private equity firm EQT Infrastructure has withdrawn its AUD 3.3bn (USD 2.3bn) indicative proposal for Vocus Group following a brief period of non-exclusive due diligence, the target company said late yesterday.

Vocus announced EQT’s AUD 5.25 per share offer less than two weeks ago on 27 May. Vocus shares plummeted 17.7% to close at AUD 3.77 today, wiping out all the gains they made when the EQT offer was announced.

Vocus will continue to implement the company’s business turnaround, Chief Executive Kevin Russell was cited as saying in the company statement yesterday.

Inframation sister publication Dealreporter last week cited a person familiar with the matter as saying that Australian utility AGL Energy had walked away from its own bid to acquire Vocus because it thought the EQT offer was too high to match. The report had said also that Vocus would be of strategic interest to AGL at a price that it could make work should the EQT bid stumble.

AGL interest
Today, people familiar said that AGL is yet to assess how to respond to EQT’s withdrawal, adding however that it will not match the Swedish company’s offer even if it decides to revive its interest.

Even at its undisturbed price of around AUD 3.50, Vocus is trading at a multiple of around eight times its FY20 EBITDA, which is similar to the comparable multiple for AGL,one of the people calculated. As the two companies have a similar growth outlook, AGL will have difficulty justifying a price that implies a significant valuation premium for Vocus, the person told Dealreporter.

Another issue for AGL is that three credible private equity bidders have conducted due diligence on Vocus and walked away, so the potential bidder will have to determine if it wants to spend the time and effort looking where other saw problems, the same person said.

AGL itself said on 31 May that it had withdrawn a non-binding indicative offer for Vocus after being unable to agree on acceptable due diligence terms. 

A third person, who is familiar with Vocus, said the company would not be reaching out to determine if AGL remained interested. He said Vocus is not for sale but the board is bound to consider approaches, which is what it did with EQT and AGL. 

Not data room
Earlier today, a local newspaper quoted Vocus CEO Russell as saying the group is not keeping a data room open as its focus is on running the business. The same media report noted that the comments made by Russell, who was appointed in May 2018, are consistent with the company’s three-year plan to focus on its core fibre business, integrate legacy networks and businesses from Vocus’ 2016 merger with M2, and improve performance of its retail division and its New Zealand arm.

In 2017, Vocus was subject to rival indicative AUD 3.50 per share offers from private equity firms KKR and Affinity Equity Partners. Both proposals lapsed after due diligence.

AGL and Vocus declined to comment beyond their statements. EQT declined to comment. 


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