Vocus raises AU$432m through institutional share offerings

To complete its purchase of Nextgen Networks, Vocus has successfully raised more than AU$430m through its institutional entitlement offer and institutional placement offer.

Vocus Communications has announced that it has raised AU$432 million in total through an institutional entitlement and institutional placement of shares in order to acquire 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.

The institutional entitlement offer raised AU$230 million, with a 97 percent uptake of the offering by eligible institutional shareholders. Under this offering, shareholders were able to purchase one new Vocus share for every 8.9 existing Vocus shares held.

Shares under the institutional entitlement offer, which was open between Wednesday, June 29, and Thursday, June 30, were priced at AU$7.55 per share, a 10.4 percent discount on their price before trading halted last Monday. As they are renounceable, entitlements that were not exercised were then offered for sale on Friday, July 1.

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.

"We are delighted with the exceptionally strong support shown for the institutional tranche of the capital raising," Vocus chairman David Spence said on Monday morning.

"We are pleased that investors share our vision of the unique and compelling strategic opportunity that the acquisition provides to Vocus. We expect that when these assets are added to Vocus' existing infrastructure network, they will enable us to provide an enhanced offering to our customers, and a strengthened platform for continued growth."

Vocus later this week expects to raise AU$452 million through a retail entitlement offer. Shares will be priced at AU$7.55 per share under the retail entitlement offer, which is open from Thursday, July 7 until Monday, July 18, with around 59.9 million new shares to be issued under both offers.

The remainder of the purchase price will be funded through existing syndicated debt facilities, with conferred consideration of up to AU$54 million.

Vocus last week 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 during a call with media last week.

"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.

In what CEO Geoff Horth called the "final piece of the puzzle", by taking ownership of Nextgen's extensive long-haul fibre network, Vocus will attain presence across regional areas as well as gaining 112 POIs.

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.