Shares of ANZ telco provider Vocus Group Ltd [ASX:VOC] have plummeted in the first few hours of today’s trading, dropping 78.5 cents by 11am. At the time of writing Vocus Share price is sitting at $3.79 apiece, down 17.14%.
The plummet seems to be a reaction to an announcement made by Vocus yesterday evening after the market closed. The note stated that discussions had terminated between Vocus and company investor EQT Infrastructure, regarding a cash bid to acquire all Vocus shares at $5.25 apiece.
Vocus received the non-binding, indicative proposal from EQT on 27 May, which triggered a spike in share price of close to 17%, showing investors’ approval of the bid. So naturally, with this most recent news of EQT pulling the plug on the arrangement, shareholders have reacted negatively.
Bidder walks, and CEO approves?
As per the announcement, EQT have walked away from the Indicative Proposal after ‘an accelerated period of due diligence’ which was granted as part of the initial bid offer.
But while this could make it appear that EQT had no trouble finding a reason to negate the proposal, it seems more of a case that Vocus were trying to shoo them out the door.
Some believe this was too quickly to make room for more appealing bidders. Of particular interest, and who are particularly interested, is utilities giant AGL Energy Ltd [ASX:AGL].
According to the Australian Financial Review, AGL ‘had an internal team running the numbers on Vocus Group for months and had retained investment banking advisers including Deutsche Bank and Highbury Partnership to provide advice’. But the offer from EQT had them put on the brakes.
However, Kevin Russell, Vocus MD and CEO, seems have to have other motives for making EQT’s offer process as quickly as possible, saying ‘I would personally prefer it if no one approached us’, while he and the company focuses on lifting the performance of Vocus’ retail division and New Zealand sector in a major business turnaround.
Vocus shares not on the selling block
Russell noted in the termination announcement that the company is ‘in the early stages of a business turnaround’.
‘We have great confidence that our strategy will deliver significant value to our shareholders in the medium to long term. There is growing demand for our strategically valuable network assets and we have a substantial opportunity to gain market share […]’
Vocus also reiterated its FY19 Underlying EBITDA expectation of $350–$370 million, unchanged from what was stated back in late February. Such stability in guidance figures is a positive reflection for a company.
That being said, Russell’s turnaround strategy has only really taken off since March, when he finally acquired the right team for the job. And with the market pulling out in line with retracted bids, it seems investors aren’t entirely confident with Russell’s vision.
A strategy update is expected from the company in the last week of June, which is worth investors taking a look at.
For Money Morning
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