KKR could buy Vocus

Private equity firm makes preliminary indicative proposal for ASX-listed telco

US-headquartered private equity firm Kohlberg Kravis Roberts & Co. L.P. has issued an indicative and non-binding proposal to acquire 100 per cent of ASX-listed telco Vocus.

KKR is offering $3.50 cash per share. In a statement issued to the ASX Vocus said the the proposal is subject to conditions including due diligence to KKR’s satisfaction, availability of financing, and unanimous support from Vocus’ board.

The proposal would also be subject to shareholder and court approval, and is based on assumptions including EBITDA for FY17 being $365-$375 million in line with guidance.

Vocus’ board has formed a committee to assess the proposal. The committee is chaired by David Spence.

The Vocus Group includes some of Australia’s best-known ISP brands, such as Dodo and iPrimus. In 2016, Vocus completed a merger with M2, creating Australia’s fourth-largest telco.

In October, the company completed its acquisition of Nextgen Networks — a deal that included the North West Cable System (NWCS) and the Australia Singapore Cable (ASC) development projects.

The offer comes at a troubled time for the telco, whose share price has dropped from $9.025 at this time last year to $2.860 at the close of trading yesterday.

In February this year, Vocus reported revenue growth of 404 per cent in the first half. Vocus reported revenue of $888.2 million for the first six months of FY17, and underlying EBITDA of $187.3 million (up 201 per cent on the comparative period). The company report underlying net profit after tax of $91.9 million, up 236 per cent.

However in May the telco downgraded its earnings guidance, saying it expected underlying EBITDA of $365-375 million compared to previous guidance of $430-450 million.

FY17 revenue was expected to be around $1.8 billion compared to guidance of $1.9 billion, the telco said. Underlying net profit after tax was expected to be in the range of $160-$165 million, down from guidance of $205-$215 million.

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