2019-10-22 09:50:071970-01-01 00:00:00

Indicative Proposal

Australian heavy-weight energy provider and retailer, AGL Energy Limited (ASX: AGL), has been granted access to conduct due diligence on the telecommunications provider, Vocus Group Limited (ASX: VOC) in support of a potential acquisition for A$3.1b at A$4.85 per share.

The acquisition faced uncertainty late last month as AGL had announced on 31 May 19 that it was unable to agree with Vocus on the terms of the due diligence to be conducted. However, following Vocus’ announcement last week on 04 Jun 19 that the Swedish private equity group EQT Infrastructure (EQT) had ceased their due diligence and had withdrawn their indicative proposal. Notably, AGL’s offer is 40 cents per share lower than EQT Infrastructure’s offer.

AGL was previously outbid by EQT’s indicative proposal to acquire Vocus at a price of A$5.25 per share in cash. However, as the indicative proposal was withdrawn after an expedited period resulting in EQT’s decision not to proceed, AGL has since emerged as a front runner in the race to acquire Vocus.

AGL this morning announced that the acquisition and convergence of energy and internet capability would optimise the usability for their increasingly connected customers. The acquisition would also strengthen its capability in the integration and management of complex assets and customer portfolios.

AGL’s strategic rationale for the acquisition includes integrating the two companies’ customer service platforms; accelerating the growth of Vocus’ high-quality broadband fibre infrastructure network (Vocus owns 7% of the NBN network). AGL will also utilise Vocus’ platform which provides enterprise, wholesale and government customers with sophisticated data services, to reinvigorate AGL’s large volume customer platform with superior data and energy services. In addition, significant research and development opportunities would be presented into the provision of innovative new products such as smart home technology that integrates energy with the internet. Finally, the usage of Vocus’ data centre business will support and further grow AGL’s wholesale electricity generation portfolio.

AGL has indicated that funding the transaction through a combination of its existing cash as well as its new debt facilities, subject to maintaining its credit rating of Baa2. Currently, AGL’s total debt to equity ratio stands modestly at 36.95% compared to the industries’ highly leveraged standard of 95.03%. AGL stated that the acquisition would likely grow its earnings per share from where it currently stands at A$2.42 within the first twelve months.

The acquisition still requires further discussions between the two companies. After completion of a favourable due diligence report, an agreement in terms from the two companies, a binding agreement is likely to follow. The agreed transaction would also be subject to Vocus shareholder approval.

In light of AGL’s announcements to conduct due diligence on Vocus this morning, shares have soared as high as 11.8% to A$4.28 per share indicating that investors are in support of the A$3.1b acquisition proposal.

AGL’s share price has dropped this morning by as much as 6.4% to A$19.58 per share on the back of the announcement indicating a risk-averse mood amongst those selling off in the AGL shareholder camp. For the buyers, in support of the acquisition, AGL’s low debt to equity ratio, steady book value, and increasing return on equity, buying AGL lower this morning represents a quality investment at a low price.

Another factor likely to influence investor sentiment relevant to the acquisition of Vocus is whether or not the Vodafone and TPG Telecom are allowed to merge. The merger was denied by the Australian Competition and Consumer Commission (ACCC) due to its belief that consumers would be negatively impacted with less competition in the telco space. However, Vodafone and TPG Telecom have challenged the decision at the federal court. If the federal court overturns the decision to prevent the merger, then a joint effort between the two Telcos would likely reduce market share across the telecommunications sector for companies such as Telstra and Vocus. However, if the federal court upholds ACCC’s decision to block the merger, then Vocus’s share price will likely rise as its market share will remain unimpeached.

By Isaac Batterham

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.



KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.


Latest TV Commercial