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<body><div style="font-family:helvetica, arial, sans-serif;">This makes me a little worried,<br></div>
<div style="font-family:helvetica, arial, sans-serif;">I hope it doesn't mean that Vocus will go the way of several (most) other ISPs...<br></div>
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<div style="font-family:helvetica, arial, sans-serif;"><i>"A private equity firm is looking to take over Vocus while the share price is low. _Kohlberg Kravis Roberts & Co want to buy out Australia's 4th largest telco at $3.50 a share </i><a href="http://www.zdnet.com/article/vocus-receives-au3-50-per-share-takeover-proposal]_"><i>http://www.zdnet.com/article/vocus-receives-au3-50-per-share-takeover-proposal</i></a><i> which was a decent premium over the $2.86 they were trading at yesterday (they've shot up to $3.45 now). The Vocus board have said they're looking into it. A huge number of NBN RSPs are basically Vocus resellers, so it'll have a decent impact on the industry if a private equity firm takes over and makes radical changes."</i><i><br></i></div>
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<div style="font-family:helvetica, arial, sans-serif;">The article reads:<br></div>
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<p>Vocus Communications has announced receiving a takeover proposal from
Kohlberg Kravis Roberts & Co (KKR) to acquire 100 percent of its
shares at a price of AU$3.50 per share via a scheme of arrangement.<br></p><p>The
preliminary, indicative, and non-binding proposal by KKR is subject to
whether Vocus' net debt does not exceed AU$1.1 billion as of June 30;
earnings before interest, tax, depreciation, and amortisation (EBITDA)
is between AU$365 million to AU$375 million for the current financial
year, and was not driven by any abnormal or one-off items; and Vocus'
existing asset base is maintained.<br></p><p>To look into the proposal,
Vocus has formed an independent board committee (IBC), chaired by Vocus
chair David Spence and comprised of Vocus' non-executive board directors
Rhoda Phillippo, Craig Farrow, Robert Mansfield, and Jon Brett.<br></p><p>Should the board approve, the indicative proposal would also need shareholder, court, and regulatory approval.<br></p><p>"The
Vocus board notes that there is no certainty the indicative proposal
will result in an offer for Vocus, what the terms of any offer would be,
or whether there will be a recommendation by the Vocus board," Vocus
said in a statement on Wednesday morning to the Australian Securities
Exchange.<br></p><p>"The Vocus board will update shareholders when the IBC has completed its assessment."<br></p><p>The proposal follows Vocus <a href="http://www.zdnet.com/article/vocus-brings-fy17-revenue-guidance-down-by-au100m/">revising its guidance for the 2017 financial year</a> last month, with revenue down by AU$100 million, underlying EBITDA down
by between AU$65 million and AU$75 million, and net profit down by
AU$45 million to AU$50 million. Vocus' net debt is expected to be
between AU$1 billion and AU$1.1 billion.<br></p><p>Underlying EBITDA is now
expected to be between AU$365 million and AU$375 million, net profit
between AU$160 million and AU$165 million, and revenue at AU$1.8
billion, Vocus CEO Geoff Horth said.<br></p><section defang_data-medusa-content-recommendation-options="{"promo":"promo_ZD_recommendation_sharethrough_top_in_article_desktop","spot":"dfp-in-article"}" defang_data-component="medusaContentRecommendation" class="sharethrough-top"><br></section><p>The company attributed AU$10 million of the EBITDA
reduction to the impact of lower than expected billings and an increased
headcount across its Enterprise and Wholesale division; AU$5 million to
low earnings in its mass market energy business due to "volatility
created by extreme weather events in 3QFY17"; AU$12 million to higher
expenses than expected, particularly on technology; AU$33 million to an
accounting review of "the negotiated contract terms on a number of large
projects"; and AU$10 million to other trading variances.<br></p><p>The drop
in expected net profit is due to pre-tax expenses of AU$113 million,
including AU$61 million from the non-cash amortisation of acquired
customer intangibles; AU$26.4 million from the amortisation of acquired
software; AU$21.4 million from acquisition and integration costs; and
AU$5.6 million from the non-cash book loss on the divestment of the <a href="http://www.zdnet.com/article/vocus-and-spark-form-connect-8-joint-venture/">Connect 8 joint venture</a> and the Cisco HCS voice platform.<br></p><p>Revenue
will be lower than previously forecast thanks to a AU$12 million
take-back from lower billings across its Enterprise and Wholesale
division; AU$40 million as a result of the accounting review, as it was
found that revenue from the projects involved would be earned in future
periods; and AU$20 million from the divestment of the Aggregato
Australia business and the Cisco HCS voice platform.<br></p><p>Vocus had in February announced a <a href="http://www.zdnet.com/article/vocus-profit-rises-to-au47-2m-signs-au20m-deal-with-superloop/">net profit of AU$47.2 million</a>,
up by almost 100 percent, due to its acquisitions of M2 and Nextgen.
This mirrored Vocus' FY16 results showing a 223 percent rise in net
profit, up to <a href="http://www.zdnet.com/article/vocus-profit-jumps-by-more-than-200-percent-to-au64m/">AU$64.1 million</a>, attributed to its <a href="http://www.zdnet.com/article/vocus-gets-federal-court-approval-to-acquire-amcom/">AU$1.2 billion acquisition of Amcom</a>.<br></p><p>Statutory
EBITDA for the first half of FY17 was AU$168.3 million, up from AU$60.7
million a year previous, while underlying EBITDA -- excluding
acquisition, integration, and other costs -- was AU$187.2 million, up
from AU$62.3 million. Vocus' underlying net profit was AU$91.85 million,
up from AU$27.37 million.<br></p><p>Revenue for the first half of the financial year rose significantly, from AU$176.3 million up to AU$888.2 million.<br></p><p>Vocus <a href="http://www.zdnet.com/article/m2-shareholders-approve-vocus-merger/">merged with M2</a> last February to form the third-largest telecommunications provider in New Zealand and the fourth-largest in Australia <a href="http://www.zdnet.com/article/m2-and-vocus-merger-to-form-au3b-telco/">worth more than AU$3 billion</a>. It raised AU$652 million last July to <a href="http://www.zdnet.com/article/vocus-buys-nextgen-networks-subsea-cable-systems-for-au861m/">acquire Nextgen Networks</a> for AU$700 million, along with the North West Cable System for AU$134
million and the Australia Singapore Cable project for AU$27 million.<br></p><div style="font-family:helvetica, arial, sans-serif;">---<br></div>
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<div style="font-family:helvetica, arial, sans-serif;">Sam McLeod<br></div>
<div style="font-family:helvetica, arial, sans-serif;">@s_mcleod | smcleod.net<br></div>
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<div style="font-family:helvetica, arial, sans-serif;">Words are my own opinions and do not necessarily represent those of my employer or partners.<br></div>
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