AAP Finance

Vocus shares dive as AGL walks away again

By AAP Newswire

Vocus has lost nearly a third of its value after AGL Energy abandoned a $3.02 billion takeover bid less than a week after making a second tilt at the internet provider.

AGL announced on Monday it was withdrawing its latest non-binding, indicative proposal to acquire the iPrimus and Dodo owner due to doubts the deal would benefit shareholders.

Investors appeared to agree, with AGL shares rising by as much as 2.8 per cent in the wake of the announcement.

At 1430 AEST, they were still 1.48 per cent higher at $19.85.

Vocus shares, however, went hurtling in the other direction and dropped more than 30 per cent to hit a near six-month low of $2.97 shortly after the open.

RBC analyst James Nevin said AGL's $4.85 per-share move for Vocus would have been a step too far despite the energy provider looking to fast forward its evolution away from wholesale generation.

Mr Niven also suggested the bid may have been opportunistic with Vocus going through a turnaround.

"We view the natural progression for the electric utility industry to provide more in-home services and management of energy usage as an evolution over time that AGL can manage organically as its customers organically start looking for these services," Mr Niven said in a note.

"We do not think that AGL needs to own the fibre infrastructure in order to provide these types of services and can contract the data services required."

Shares in AGL slumped on news of its approach for Vocus last week, with analysts questioning the value of the deal.

AGL's bid came less than a week after Swedish private equity firm EQT Infrastructure scrapped its own $3.3 billion takeover tilt at the Sydney-based telco firm.

AGL had already withdrawn a non-binding takeover offer prior to Vocus' failed EQT negotiation.

Vocus chief executive Kevin Russell said in a release on Monday there remained growing demand for the company's "strategically valuable network assets" despite four suitors now having walked away from a deal.

"As we have repeatedly said, this is a three-year turnaround," Mr Russell said.

"We have great confidence that our strategy and ability to execute our business plan will deliver significant value to our shareholders in the medium to long term."

Mr Niven said, while it appeared AGL was looking to push into the area of data value streams more quickly than anticipated, the company may be better off partnering with or acquiring one of the 180 or so residential resellers listed on the NBN website.

"While the economics of standalone NBN reselling do not look great, we think that it makes more strategic sense to start providing these types of services to its existing customers," Mr Niven said.

"(Acquiring smaller resellers) would make a small ripple compared to the big splash of a Vocus takeover, we think it would be a more logical use of shareholder funds."

AGL managing director and chief executive Brett Redman said on Monday the company had believed Vocus' asset base displayed attributes that could support the execution of its strategy.

"However, we are no longer confident that an acquisition of Vocus at the proposed terms would represent sufficient certainty of creating value for AGL shareholders," Mr Redman said.

AGL earlier this month warned its FY20 earnings would take a hit of up to $100 million because of a seven-month outage at its Loy Yang A power station in Victoria.

AGL had earlier underlined further costs to keep Loy Yang running, as it also faces governmental pressure to keep energy prices in check.

On Monday, Vocus reiterated its underlying earnings for the 2019 financial year.

The company's share price was 25.23 per cent lower at $3.265 at 1430 AEST.