(Bloomberg) -- KKR & Co. offered to buy Vocus Group Ltd. for A$2.18 billion ($1.6 billion) after the Australian telecommunications company's stock price collapsed in the past year.
The New York-based private equity firm bid A$3.50 a share in cash, 22 percent more than the most recent closing price, Vocus said in a statement Wednesday. Vocus hired Credit Suisse Group AG and Goldman Sachs Group Inc. as advisers and formed a committee to assess KKR's proposal.
Vocus stock jumped the most in seven years but still traded shy of KKR's offer as Citigroup Inc. said in a report the buyout firm was trying to get hold of underperforming assets on the cheap, and its bid was too low.
“I don't even think it's at a level where KKR will be granted due diligence,” said James Santo, a senior vice president at asset manager Northern Trust Corp. in Sydney. “The price will have to go higher if they want a deal.”
Vocus shares surged 20 percent to A$3.42 at 1:24 p.m. in Sydney. Before today, Vocus shares had tumbled 69 percent from a peak of A$9.30 in May 2016.
The company's value evaporated after it spent about $2.7 billion on three acquisitions between 2014 and 2016, the biggest of which was the $1.6 billion takeover of rival M2 Group Ltd.
There's strategic value in Vocus's fiber network and building connectivity that cannot be easily replicated, Santo said. The assets may elicit counter interest from regional telecommunications players and other buyout firms, he said.
A takeover would hand KKR a national fiber network that connects all Australian state capitals and most regional cities across Australia and New Zealand. KKR's offer is subject to satisfactory due diligence and unanimous recommendation from the Vocus board.
KKR's offer assumes that Vocus's net debt at June 30 won't be greater than A$1.1 billion, and the company's earnings before interest, taxes, depreciation and amortization is in the targeted range of between A$365 million and A$375 million, according to Vocus' statement.
“There is no certainty the indicative proposal will result in an offer for Vocus, what the terms of any offer would be, or whether there will be a recommendation by the Vocus board,” Vocus said in its statement.
To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net, Brett Foley in Melbourne at bfoley8@bloomberg.net.
To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Edward Johnson
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