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Is Vocus Group Ltd about to get a much higher bid?

All eyes will be on Vocus Group Ltd’s (ASX:VOC) share price this morning with fresh speculation that the embattled telecom and utility services company will get a third bidder coming into the ring – and this bidder might bring Vocus’s founder and industry doyen James Spenceley along for the ride.

Such a move will be welcomed by most of Vocus’s shareholders as no one knows the assets in the group like Spenceley and if there is any chance of Vocus getting a higher bid than the $3.50 that is currently tabled, it will be a bid spearheaded by Spenceley.

Spenceley has been at the heart of the mega mergers that have radically transformed the group. These included a $1.2 billion takeover of Amcom, a $3.8 billion merger with M2 Group and an $807 million acquisition of Nextgen.

The deals have given Vocus a set of valuable infrastructure assets but Spenceley quit the board suddenly along with fellow director and Amcom founder Tony Grist after their failed attempt to replace chief executive Geoff Horth.

Horth had done a reasonable job taking over the reins from Vaughan Bowen to run M2 Group, but the plunge in Vocus’s share price has lost him a lot of fans.

Not all the blame can be placed at Horth’s feet. The telecom sector used to be a dependable sector for investors but its risk profile has risen sharply with even the likes of Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM) coming under pressure.

What a perfect time for private equity firms to come knocking and they’ve arguably picked on the weakest. KKR and Affinity Equity Partners seized the opportunity to offer $3.50 a share in two competing bids for Vocus. They will very likely have to sweeten their offer if it has any hope of succeeding, but the conditional offers have at least allowed them to examine the group’s books.

While there is a good chance of a third competing bid emerging, there is a lack of conviction in the market with Vocus’s share price spending most of the past few weeks under the $3.50 offer price. But news that Spenceley might be teaming up with a new suitor will surely excite investors as he could very well spark a heated bidding war for the beaten-down group.

This isn’t to say you should rush to buy shares in Vocus. Buying on the back of takeover hopes is almost always a bad idea for retail investors. The good news is that there is another buying opportunity the experts at the Motley Fool have found, and this stock is supported by strong fundamentals. Click below for more details (it’s free!).

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Motley Fool contributor Brendon Lau owns shares of TPG Telecom Limited and Vocus Communications Limited. The Motley Fool Australia owns shares of Telstra Limited, TPG Telecom Limited, and Vocus Communications Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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