Vocus tumbles as suitors walk

AUSTRALIA’S struggling telecommunications industry has suffered a fresh sell-off, dragging down the broader stockmarket after junior carrier Vocus revealed its two suitors were walking away.

Shares in Vocus, owner of brands including Dodo and iPrimus, tumbled 14.6 per cent yesterday after it declared talks with the two private equity houses — including US titan Kohlberg Kravis Roberts — had collapsed.

Wiping almost $300 million from the group’s market value, it was the biggest single-session slump to befall Vocus since the devastating 27 per cent rout that followed its profit warning in May.

At the same time yesterday, Telstra shares surrendered the meagre gains they made on Friday, resuming their slide after slumping more than 10 per cent earlier last week.

Investors stripped about $5.5 billion from Telstra’s market value on Thursday after chief executive Andy Penn revealed the telco would cut its dividend in coming years to build a war chest in an increasingly competitive market.

Shares in the Australia’s biggest telco closed down 0.8 per cent yesterday at $3.87.

The broader telecommunications industry slipped 1.3 per cent yesterday to be worst performing sector, dragging the ASX 200 0.4 per cent lower.

Vocus chairman David Spence said the company could not agree to a deal with its suitors, New York-based KKR and Hong Kong-based Affinity Equity Partners, on suitable terms.

“Throughout the due diligence process the bidders indicated support for management’s strategic plans and transformation program,” Mr Spence said in a statement.

“However, the bidders have now advised that they are unable to support a transaction on terms acceptable to the board. Accordingly all discussions have now ceased.”

Vocus has grown dramatically in recent years with a suite of buyouts, including a $1.2 billion takeover of Amcom, a $3.8 billion deal with M2 Group and the $807 million acquisition of Nextgen.

But the company has hit major hurdles as it tries to bed down the acquisitions.

Last week, the group warned it would miss its fullyear forecast for underlying earnings — a tally that strips out “one-offs” — and write $1.53 billion off the value of operations in Australia and New Zealand.

Vocus in June was approached by KKR with a buyout proposal at $3.50 in cash for each share, valuing the group at $2.18 billion.

Affinity swooped a month later with a matching offer.

Both private equity houses were allowed to inspect Vocus’s book.

“The process with the bidders has now concluded and the board is looking forward to working with management to deliver improved returns for shareholders over the medium and long-term,” Mr Spence said.

An important factor “in the board’s determination to conclude the sale process” was the outlook for the new financial year, he said.

Vocus is forecasting revenue to clock in between $1.9 billion and $2 billion for the year to next June.

Its results for the past financial year are due tomorrow.