The Vocus Group Ltd (ASX:VOC) share price has plunged 16% to $2.70 today, after would-be buyers Kohlberg, Kravis & Roberts (KKR), and Affinity Equity Partners withdrew their bids for the company. Shares in fact opened as low as $2.43, before recovering:
It's just the latest upset at Vocus, following a handful of downgrades and last week's announced $1.5 billion impairment of goodwill. The goodwill reduces the value of Vocus' intangible attributes – like its brands – primarily due to changes in the discount rate and terminal growth rates used to calculate their value. In a nutshell, due to the increasingly competitive environment, Vocus had to use more conservative assumptions about the future value of its assets – which is why it took the write-down.
Still, I think that investors today are more concerned that neither would-be bidder for Vocus' was interested in making a formal bid for the company after having a look at the books. This could reflect either KKR and Affinity being unwilling to proceed with the acquisition, or Vocus management unwilling to accept the kind of price that either company wanted to offer. Management's statements today imply that it was the latter, as:
"Throughout the due diligence process the Bidders indicated support for management's strategic plans and transformation program. However, the Bidders have now advised that they are unable to support a transaction on terms acceptable to the Board."
It's not all bad though, one company that rejected a KKR takeover has gone on to do very well for itself – Treasury Wine Estates Ltd (ASX: TWE). Treasury shares are up more than 100% since they knocked back a formal takeover at $5.50 a few years ago. Speaking for myself I'm more inclined to be a Vocus buyer than a seller at today's prices.
