Is it time to buy Vocus Group Ltd shares?

For complete disclosure, my family owns Vocus Group Ltd (ASX: VOC) shares.

Naturally, from much higher prices — the investment is deep in the red.

Is it time to buy Vocus shares?

The recent takeover offer from private equity firm KKR sparked life into Vocus shares which were on a steep decline.

Over the past year, Vocus shares have been priced as high as $9 and as low as $2.33. They’re currently $3.43.

Interestingly, Vocus shares currently sit below KKR’s non-binding offer price of $3.50. Earlier this week, Vocus opened the door to KKR’s investment bankers. This will allow them a look under the hood.

The purpose of the move is to attract a higher — and binding — takeover offer, it seems. This is what Chairman David Spence said:

“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.”

Adding, “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.”

In English — and my own words — that says to me the Vocus board would be happy with a takeover offer if only KKR would offer a little more doh.

What’s a shareholder to do?

So, the state of affairs is such that investors can buy Vocus shares on market and, provided KKR is happy to proceed, shareholders could walk away with $3.50 if its board accept the offer. That’s a measly 2% premium on today’s market prices.

Also, the deal could fall through and the share price would probably come under pressure.

The final outcome is that KKR will increase their offer. Subject to their due diligence, it perhaps wouldn’t be that much higher than their current offer. I’d say somewhere between $3.60 and $4 sounds reasonable. At the midpoint of that range, it implies a 10% premium for investors who choose to buy Vocus shares today. Of course, management could reject that offer.

Foolish Takeaway

In my opinion, Vocus shares appear to be decent value today. For myopic investors, the chief risk would be that the $3.50 offer falls through and the share price falls. However, I continue to believe that Vocus shares also hold long-term potential.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned but his mother owns shares of Vocus. You can follow him on Twitter @OwenRask.

The Motley Fool Australia owns shares of 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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