[AusNOG] Vocus the target of a private equity takeover

[Peter Tiggerdine]

Article has being pulled already.
Regards,

Peter Tiggerdine

GPG Fingerprint: 2A3F EA19 F6C2 93C1 411D 5AB2 D5A8 E8A8 0E74 6127


On Thu, Jun 8, 2017 at 9:12 AM, Sam McLeod <ausnog at smcleod.net> wrote:
> 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
> 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
> 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 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, 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, attributed to its AU$1.2 billion acquisition of Amcom.
>
> 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 last February to form the third-largest
> telecommunications provider in New Zealand and the fourth-largest in
> Australia worth more than AU$3 billion. It raised AU$652 million last July
> to acquire Nextgen Networks 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.
>
>
>
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