Vocus Ends Talks With KKR, Affinity on A$2.2 Billion Buyout

  • Both buyout firms offered A$3.50 per share in cash for telco
  • Vocus confident it can “return to sustainable organic growth”

Vocus Group Ltd. ended talks with KKR & Co. and Affinity Equity Partners Ltd., which had made separate A$2.2 billion ($1.7 billion) bids for the Australian telecommunications company, saying it was confident of returning to sustainable growth.

After conducting due diligence both private equity firms informed Vocus they were unable to support a transaction on terms acceptable to the board, the Sydney-based company said Monday in a statement.

KKR in June made an indicative offer of A$3.50 a share in cash, which was matched last month by Affinity. Vocus shares plunged as much as 25 percent on Monday and were 17 percent lower at A$2.67 at 11:02 a.m. in Sydney.

Ceasing takeover talks leaves Vocus management to pursue an existing strategy to restore profitability and integrate acquisitions after the company went on a $2.7 billion spree between 2014 and 2016. The company operates a national fiber network that connects all Australian state capitals and most regional cities from Australia to New Zealand.

“The board is confident that the company can deliver a return to sustainable organic growth following a year of transition,” Vocus said in the statement.

An important factor in the decision to terminate the sale process is the company’s forecast revenue growth for the 2018 financial year to between A$1.9 billion and A$2 billion and underlying earnings before interest, tax, depreciation and amortization growth to between A$370 million and A$390 million, the company said.

KKR earlier this month agreed to buy Australian non-bank mortgage lender Pepper Group Ltd. for A$676 million while Hong Kong-based Affinity Equity Partners owns Australian ticketing agency TEG Pty Ltd. as well as a stake in Virgin Australia Holdings Ltd.’s Velocity frequent flier program, according to its website.

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