Vocus sale finalised – and with ink barely dry, fresh NZ IPO talk emerges

The company behind Orcon, Slingshot, Flip and Sky Broadband is changing hands.

Vocus Group is being sold to Macquarie Group subsidiary Mira, in a A$3.5 billion ($3.7b) deal backed by Aware Super, in a deal that will close on July 22.

But with the ink barely dry on the final scheme document, The Australian’s Dataroom gossip column says Mira has hired Goldman Sachs, UBS and Forsyth Barr to manage an initial public offering or possible trade sale of the telco’s NZ arm.

Investor meetings are scheduled to get underway in about four weeks.

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The new round of maneuvering comes at a time when Sky TV has just revealed “unsolicited, incomplete and conditional approaches” from un-named parties, leading to speculation the pay-TV provider could be heading for a deal involving a telco. But Sky has been there before. It’s 2017 attempt to merge with Vodafone’s NZ business was shot down by the Commerce Commission.

In November last year, Vocus Group hired Goldman Sachs, Jarden and Craigs Investment Partners to kick the tyres for a possible NZX listing of Vocus’ NZ assets (which, beyond the 226,000 customers using its various retail ISP brands, include a nationwide fibre network, a data centre operation, and retail power company Switch Utilities).

But in February, the IPO effort was suspended after the board received Mira’s trade-sale offer.

Meanwhile, trading in Vocus Group shares on the ASX has been suspended after an Australian Court greenlit the sale of the transtasman telco, and shareholders voted to approve the A$3.5 billion ($3.7b) or A$5.50 per share offer – which represented a 25 per cent premium on Vocus’ price in February when the bid was first announced (Vocus’ final trading price was A$4.49).

NZ’s Overseas Investment Office has also approved the deal.

The new owner is Macquarie Infrastructure and Real Assets Management (Mira), a division of ASX-listed Macquarie Group, whose bid was supported by Aware Super – Australia’s second-largest retirement fund.

“All the hurdles have now been met for Mira to complete the transaction.The scheme is now legally effective and shareholders will receive the cash consideration of A$5.50 per share on July 22,” Vocus spokesman Quentin Reade told the Herald.

After Mira made its offer in February, Vocus called off a plan to list its NZ business on the NZX at a valuation of around $720m – making it the second telco lost to the local exchange at the last minute after Vodafone NZ, whose float was headed-off by a trade-sale to Infratil and Brookfield in 2019.

The sale to Mira marks the end – maybe – of a multi-year process that has seen three different private equity funds reach the due diligence phase, only to go no further. At one point Trustpower came close to buying the telco’s NZ business, only to see new management at Vocus take it off the table as the Kiwi operation reported a strong result.

Auckland-based Mark Callander – an executive director of Vocus Group, as well as being in charge of its wholesale operation on both sides of the Tasman and serving as the company’s NZ CEO – is glad the extended speculation is now behind him.

“The completion of this process creates an exciting next phase for the Vocus business in New Zealand as we continue to pursue our growth ambitions in the market,” Callander told the Herald earlier today.

“These processes can be distracting, but the entire team has remained focused on delivering exceptional services to our customers every step of the way.I’m proud of what we continue to achieve and how well we are positioned in the market moving forward.”

Vocus NZ by the numbers

Vocus NZ’s recent forays have included buying the 20,000-customer Stuff Fibre, partnering with Sky TV and Chorus on the new Sky Broadband service, and being the first telco (through its Orcon brand) to offer Chorus’ new Hyperfibre 8 product.

The 2020 Stuff Fibre acquisition bumped Vocus’ NZ subscriber base up 10 per cent to around 226,000 (putting Vocus well ahead of 2degrees and Trustpower in fixed-line broadband, if still some distance being Vodafone NZ on around 420,000 and Spark on around 700,000).

For its 2020 financial year, Vocus Group reported that revenue for its New Zealand operation rose 6 per cent to NZ$398.8m for the year to June 30, while ebitda rose 4 per cent to NZ$65.4m.

It was the NZ operation’s fifth straight year of operating earnings growth, helping to explain the apparent expectation of its IPO at a A$700m market cap – a substantially higher valuation than the reported A$500m price tag when Vocus tried to sell its NZ business in 2018 (it was ultimately withdrawn from sale).

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