AGL’s Share Price Down, on Making $3 Billion Bid for Vocus

Never a company to be outdone, AGL Energy Limited [ASX:AGL] has announced it will go ahead with non-binding, indicative proposal to acquire Vocus Group Limited [ASX:VOC] — after earlier claims the companies were unable to come to terms.

Vocus is a ‘vertically integrated’ telecommunications provider of data, cloud and internet provider services, operating a number of brands including Dodo and iPrimus.

AGL’s share price is currently valued at $19.80, falling 5.3% since market open.

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Why Turnaround agreement aids AGL’s share price

The latest proposal from AGL has a recommended buy-out price of $4.85 per share and is subject to several conditions, including a ‘unanimous recommendation’ from the Vocus board, as well as shareholder, court and regulatory approvals. The company has a four-week due diligence period to consider the proposal.

As said in a statement, AGL believes that acquiring Vocus is a way to ‘meet the needs of increasingly connected customers as energy and data streams converge and the traditional energy sector transforms…

AGL’s management also appear to be eyeing off what they call Vocus’s ‘high quality broadband infrastructure’ and ‘exposure to enterprise, wholesale and government customers’ if the companies were to integrate.

Why AGL picked Vocus

While discussions are incomplete, it’s clear that AGL see’s considerable value in both Vocus’s assets and customer base.

But while the announcement is largely positive, the market appears almost cool. The proposal follows Friday’s news that outages to a unit at the Loy Yang A power station in the Latrobe valley have resulted in operational damage which may take months to correct.

If that’s the case, there are fears this may feed into FY 2020’s financial results, with costs potentially reaching upwards of $100 million. Such news is unlikely to spur positive investor sentiment — in a direct contradiction to Vocus’ current share price.

In spite of their long-term plans for Vocus, AGL’s longer-term growth remains uncertain.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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