Telecom and data business Vocus Group Ltd (ASX: VOC) shares have leapt 20% to $3.43 after rumours of a private equity takeover bid finally came to fruition this morning. Leveraged buyout firm Kohlberg, Kravis and Roberts, known as KKR, offered to buy Vocus shares at $3.50 apiece.
The offer is dependent on several conditions including no dividends being paid, no divestments being made, net debt at 30 June not being above $1.1 billion, and the company meeting its previous guidance of $365 million to $375 million in EBITDA.
Management at Vocus has established a working group to examine the bid, and counselled shareholders to take no action at this stage. They will be considering the range of outcomes for the business, and its likely value to shareholders in a variety of scenarios.
Speaking for myself, I'm inclined to view the offer with some scepticism. The offer might seem welcome to recent buyers who felt the pain as their shares fell to $2.50 or below, but KKR isn't offering to buy Vocus because they think the business is worth $3.50 a share, they're offering because they think it's worth substantially more.
Vocus has been heavily targeted by short sellers in recent times as a result of its high debt load and recent earnings downgrade. While the company does have issues, it also has a strong portfolio of long-life assets and has been growing its NBN market share. Shares are also currently traded below $3.50, suggesting that investors believe that the deal won't go ahead and also that there won't be another, higher bid.
Shareholders effectively have two choices:
- Sell at close to the offer price
- Wait to see what eventuates (which could be a higher offer, the offer going ahead at $3.50, or offer falling through and shares falling)
Speaking for myself I think Vocus still looks cheap and will be holding my shares.
