The speculation swirling around enterprise and retail internet services business Vocus Group Ltd (ASX: VOC) is set to surge this morning, after its founder James Spencely last night announced he had "purchased back a big chunk" of Vocus shares in recent weeks.
The group has also received a takeover offer from private equity group Kohlberg Kravis Roberts (KKR) at $3.50 per share today.
Spenceley and fellow director Anthony Grist the founder of Amcom left the group as directors in October 2016 after a boardroom bust-up with the group's current CEO Geoff Horth and allies from the legacy M2 Group internet services business.
Many staff at the original Vocus fibre-optic internet business followed Spenceley out the door including its CFO and several senior sales or client-facing staff that helped grow the business.
The combined Vocus group's integration of its $861 million acquisition of Nextgen Networks, Australia Singapore Cable, and North West Cable internet services business has also not delivered to expectations as the group presumably struggles with staffing issues.
The last giant profit downgrade issued by the current CEO in May 2017 was blamed on, inter alia, financial reporting issues as the group struggles to merge four new businesses coherently.
KKR Bid
This morning the Vocus group received a $3.50 per share low-ball takeover offer from private equity group Kohlberg Kravis Roberts (KKR), which is no surprise given the shares are substantially undervalued at $3.50 if the group can get its operational act together.
In fact given the long-term growth potential of the Vocus fibre-optic businesses in particular this would have to rank as the worst takeover offer I have seen in the history of the ASX.
Except for one maybe, when KKR bid $4.70 per share for Treasury Wine Estates Ltd (ASX: TWE) in 2014. Today shares sell for $13.26 after the bid was rejected by Treasury's visionary CEO and board. KKR eventually raised its Treasury bid to $5.20 per share, which was also rejected and goes to show the opportunistic approach of the KKR in hoping to pick up assets at chronically undervalued levels.
Vocus also has as much as 15% or more of its stock sold short, which has heaped pressure on the share price and today's takeover bid could force a big share price rise as short sellers are potentially forced to buy back 15% of the stock on market all at around the same time.
At a minimum I would expect KKR would have to come back with a majorly improved takeover offer for Vocus and with the possibility of other bidders for a group with some very attractive assets this looks a story to watch.
