The Vocus Group Ltd (ASX: VOC) share price has stabilised around $3.50 now that bidders KKR and Affinity are both looking at the company's books.
Fairfax media reported this morning that KKR and Affinity have both begun talking to the Foreign Investment Review Board (FIRB) who will likely be required to give approval for any sale of Vocus' assets to a foreign entity.
As we've seen with previous offers for companies like Graincorp Ltd (ASX: GNC), once FIRB approval is required the process becomes far lengthier, and occasionally politicised. As it happens the takeover of Graincorp was ultimately rejected for political reasons. Although, the sale of Vocus is unlikely to be subject to the same politics, given the number of major competitors in the telecom space including TPG Telecom Ltd (ASX: TPM) and Telstra Corporation Ltd (ASX: TLS).
Importantly for shareholders there remain a number of steps ahead before a deal could be done:
- Bidders look at the books
- They make a binding offer at whichever price (or withdraw their bid)
- Vocus board considers the bid
- Vocus board decides to recommend or reject the bid
- In parallel or subsequent to the earlier steps, FIRB considers the bid and likely takes a couple of months to reach a decision
- If all the above steps are successful, bid goes ahead
Thus there could be several months before a decision is reached, and that's if a binding offer is even made for the company or the FIRB permits the takeover. It may lead to an impatient wait for shareholders who are unwilling to risk buying more (as the company may be sold at $3.50 or see a bid fall through) or sellers unwilling to miss the prospect of a higher bid. Patience may be the best strategy for those of the view that Vocus is worth more than $3.50.
