Vocus raises AU$228.5m through retail offer for Nextgen Networks acquisition

Vocus Communications has announced raising AU$152 million through a retail entitlement offer and AU$76.5 million through a retail shortfall bookbuild in order to assist its acquisition of Nextgen Networks for AU$700 million, along with the North West Cable System (NWCS) for AU$134 million and the Australia Singapore Cable (ASC) project for AU$27 million.

Vocus on Thursday afternoon announced the results of its retail entitlement offer, with just 68 percent of available offers taken up, and on Friday morning revealed that the 9 million shares not taken up under the offer were then sold overnight in its shortfall bookbuild.

The 20 million shares taken up under the 1 for 8.9 accelerated, renounceable retail entitlement offer were priced at AU$7.55 per share, while those under the bookbuild were offered at AU$8.50 per share. Consequently, eligible retail shareholders are to be paid the retail premium of AU$0.95 in cash for each of their retail entitlements sold in the shortfall bookbuild next Friday.

"Completion of the retail shortfall bookbuild represents the final stage of Vocus' equity raising of approximately AU$652 million to support the acquisition of Nextgen Networks from the Nextgen Group, as well as two development projects, the North West Cable System and the Australia Singapore Cable," Vocus said in a statement to the Australian Securities Exchange.

In early July, Vocus announced raising AU$432 million in total through an institutional entitlement and institutional placement of shares.

The institutional entitlement offer raised AU$230 million, with a 97 percent uptake of the offering by eligible institutional shareholders.

The institutional placement was then offered at a price of AU$8.42 per share, with 24 million new shares issued for a total price of AU$202.08 million. The company had been expecting to make AU$200 million from this.

In total, therefore, Vocus has raised AU$660.5 million prior to paying out eligible shareholders. The remainder of the AU$861 million purchase price will be funded through existing syndicated debt facilities, with conferred consideration of up to AU$54 million.

Vocus last month announced its acquisition of Nextgen Networks, which it said would put it "in a class with Optus" in terms of both fibre infrastructure and access to almost double the points of presence (POIs).

"We think it would be highly unlikely that anyone would ever build a AU$1.2 billion inter-capital network around Australia again, so we sort of class this as a bit of an invaluable asset in that respect," Vocus executive director James Spenceley said.

"And given its scale and reach, we put it in a class of Optus in terms of a comparison in infrastructure reach and breadth, and it really places us sort of in that -- give or take -- around the second infrastructure reach in the country now, combined with the Vocus business.

"We could be number two in terms of people connecting to POIs, maybe number three."

The acquisition will see Vocus expand its extensive fibre footprint in Australia: Nextgen owns a 17,000km fibre backhaul network in Australia, including operating and maintaining more than 6,000km of the federal government's Regional Backbone Blackspots Program.

"The Nextgen Networks national fibre network is a world-class asset that brings to Vocus fibre access to 70 datacentres, fibre access to more than 1,100 buildings, and requires only AU$11.5 million of additional capital expenditure to bring our combined points of interconnect (POIs) to 112 of 121," Spenceley said.

Vocus has already connected 1,300 buildings to its 700km of fibre in Australia, as well as 4,200km of fibre in New Zealand.

The NWCS, a proposed 2,000km subsea cable between Darwin and Port Hedland for the purpose of servicing the mining and offshore oil and gas industries in Western Australia, is expected to commence construction at the end of this year. Spencely said the company is further along in developing the subsea cable project than any competitors with similar routes.

The deal will lastly see Vocus pay AU$27 million to acquire 100 percent of the Australia Singapore Cable (ASC) project, which was originally a AU$170 million 50-50 joint-venture deal between Vocus and Nextgen Networks to construct a 100Gbps 4,600km subsea cable connecting Perth to Singapore and Indonesia.

Vocus competes with Telstra, TPG, and Optus in the fixed-line space.

Subject to clearance by the Australian Competition and Consumer Commission (ACCC), the acquisition is expected to be completed within three months.