Vocus Communications has announced receiving a second takeover proposal from Affinity Equity Partners to acquire 100 percent of its shares at a price of AU$3.50 per share.
Affinity's preliminary, indicative, and non-binding proposal, submitted after market closing on Monday, said a takeover would occur via a scheme of arrangement and be paid in cash.
"The board of Vocus has concluded that, subject to negotiation of an appropriate confidentiality agreement, it is in the best interests of shareholders to also grant Affinity the opportunity to conduct due diligence on a non-exclusive basis in order to establish whether an acceptable binding transaction could be agreed," Vocus said.
"The board of Vocus now considers that the interests of shareholders will be best served by a formal process to thoroughly evaluate whether a change of control offer, at a price and on terms that the board would recommend, can be secured."
Vocus added that its board would update shareholders "as appropriate".
The Affinity offer follows Vocus last week taking the next step in its takeover proposal from Kohlberg Kravis Roberts & Co (KKR) by allowing KKR to conduct due diligence to explore whether a binding transaction could be agreed upon.
"The Vocus board believes that the management of Vocus has established a strong strategic plan which will deliver value for shareholders both in the short and medium term," Vocus chair David Spence said in a statement to the Australian Securities Exchange (ASX) last week.
"While we are confident that the management team can deliver on the strategic plan, we believe it is in the best interests of shareholders to grant KKR due diligence to explore whether a potential whole-of-company proposal is available that takes into account the benefits that the plan delivers."
Vocus has said the Affinity proposal is subject to "substantially similar" conditions as the KKR proposal: Due diligence being completed; the availability of financing; unanimous recommendation by Vocus' board; entry into a definitive scheme implementation agreement; approval by an independent expert that the takeover would be in shareholders' best interests; approval by Vocus shareholders; court approval; and Foreign Investment Review Board (FIRB) approval.
Vocus had announced receiving the initial takeover proposal a month ago, with KKR proposing to acquire 100 percent of its shares at a price of AU$3.50 per share via a scheme of arrangement.
KKR had said its preliminary, indicative, and non-binding proposal would be subject to whether Vocus' net debt did not exceed AU$1.1 billion as of June 30; earnings before interest, tax, depreciation, and amortisation (EBITDA) were between AU$365 million to AU$375 million for FY16-17, and not driven by any abnormal or one-off items; and Vocus' existing asset base was maintained.
The proposal followed Vocus revising its guidance for the 2017 financial year in May, with revenue down by AU$100 million, underlying EBITDA down by between AU$65 million and AU$75 million, and net profit down by AU$45 million to AU$50 million. Vocus' net debt is expected to be between AU$1 billion and AU$1.1 billion.
Underlying EBITDA is now expected to be between AU$365 million and AU$375 million, net profit between AU$160 million and AU$165 million, and revenue at AU$1.8 billion, Horth said.
CFO Mark Wratten last month expressed confidence that Vocus would be able to hit its revised guidance for the 2017 financial year.
Vocus in February announced net profit of AU$47.2 million, up by almost 100 percent, due to its acquisitions of M2 and Nextgen. This mirrored Vocus' FY16 results showing a 223 percent rise in net profit, up to AU$64.1 million, attributed to its AU$1.2 billion acquisition of Amcom.