[AusNOG] Vocus the target of a private equity takeover

[Sam McLeod]

This makes me a little worried,
I hope it doesn't mean that Vocus will go the way of several (most)
other ISPs...
*"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 **
http://www.zdnet.com/article/vocus-receives-au3-50-per-share-takeover-proposal*[1]*
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."** *
The article reads:

---
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.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.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.Should the board approve, the indicative proposal would also need
shareholder, court, and regulatory approval."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."The Vocus board will update shareholders when the IBC has completed its
assessment."The proposal follows Vocus revising its guidance for the 2017 financial
year[2] 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.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.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.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 Connect 8 joint venture[3] and the Cisco HCS voice platform.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.Vocus had in February announced a net profit of AU$47.2 million[4], 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 AU$64.1 million[5], attributed to its AU$1.2 billion acquisition
of Amcom[6].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.Revenue for the first half of the financial year rose significantly,
from AU$176.3 million up to AU$888.2 million.Vocus merged with M2[7] last February to form the third-largest
telecommunications provider in New Zealand and the fourth-largest in
Australia worth more than AU$3 billion[8]. It raised AU$652 million last
July to acquire Nextgen Networks[9] 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.---

--
Sam McLeod
@s_mcleod | smcleod.net

Words are my own opinions and do not necessarily represent those of my
employer or partners.


Links:

  1. http://www.zdnet.com/article/vocus-receives-au3-50-per-share-takeover-proposal]_
  2. http://www.zdnet.com/article/vocus-brings-fy17-revenue-guidance-down-by-au100m/
  3. http://www.zdnet.com/article/vocus-and-spark-form-connect-8-joint-venture/
  4. http://www.zdnet.com/article/vocus-profit-rises-to-au47-2m-signs-au20m-deal-with-superloop/
  5. http://www.zdnet.com/article/vocus-profit-jumps-by-more-than-200-percent-to-au64m/
  6. http://www.zdnet.com/article/vocus-gets-federal-court-approval-to-acquire-amcom/
  7. http://www.zdnet.com/article/m2-shareholders-approve-vocus-merger/
  8. http://www.zdnet.com/article/m2-and-vocus-merger-to-form-au3b-telco/
  9. http://www.zdnet.com/article/vocus-buys-nextgen-networks-subsea-cable-systems-for-au861m/
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