Macquarie buys Vocus, owner of Orcon and Slingshot, heading off NZX listing

Macquarie has entered a binding agreement to buy ASX-listed Vocus Group – owner of Orcon and Slingshot on this side of the Tasman – in a A$3.5 billion ($3.7b) deal, subject to investor and regulatory approval.

In recommending shareholders accept the deal, Vocus chairman Bob Mansfield said the board had considered it against alternatives, including pressing ahead with the plan to list Vocus’ NZ business, then use the estimated $722 million proceeds to pay down debt.

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ASX-listed Macquarie – which has wide-ranging infrastructure investment and investment banking interests – has yet to make any comment on its plans for Vocus Group. But Australian media has already reported that plans for a Vocus NZ IPO were likely to be shelved by the owner.

Vocus’ NZ assets include retail internet service providers Orcon, Slingshot and Flip (bought from NZ’s CallPlus for $250m in 2016); Stuff Fibre (bought from Nine earlier this year in a deal referenced at $8m in a Vocus filing); the nationwide fibre network formerly owned by FX Networks (bought in 2014 for $116m), data centres formerly owned by Maxnet (bought in 2012 for $10m and since upgraded) and small power retailer Switch Utilities.

The company is our third-largest broadband provider and in line for a customer spike – having recently been named as Sky TV’s partner for its pending broadband service.

Goldman Sachs, Craigs and Jarden had been appointed managers for the possible NZX float.

But now it could be that, for a second time, a big telco float on the NZX will be headed-off by a trade sale. In 2019, Vodafone’s plan to list its NZ operation was nixed by a private offer from Infratil and Brookfield.

Vocus Group’s ASX-listed shares were recently trading at A$5.45. On February 9, Vocus confirmed in a filing that it had received a non-binding bid from Macquarie Infrastructure and Real Assets Management (MIRA) of $5.50 a share – valuing Vocus at A$3.4b or a 25 per cent premium over its then stock price of A$4.38. MIRA is a unit of the ASX-listed Macquarie Group.

But that’s all speculation. As things stand, MIRA (a division of ASX-listed Macquarie Group) has yet to look at Vocus’ books, and the statement says there’s no guarantee a binding bid will follow (since 2017, three other non-binding bids, all from private equity companies – EQT, KKR and Affinity – fell over during due diligence).

A busy few months has seen Vocus NZ buy Stuff Fibre, relaunch its budget-priced Flip brand, become the only major player to support Chorus’ Hyperfibre product, expand its partnership with Google, and reveal that it will be the partner for Sky TV’s soon-to-launch Sky Broadband service.

The 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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