MENU

Is Spark New Zealand Ltd set to buy Vocus Group Ltd’s NZ business?

Shares in embattled internet-services Vocus Group Ltd (ASX: VOC) are up 3 per cent to $3.06 today and 29% over the last month after the company recently revealed plans to sell its New Zealand operations.

Vocus owns the popular Slingshot, CallPlus and Orcon home or business internet brands in New Zealand, with the combined NZ group delivering EBITDA of $57.5 million over financial year 2017. It’s also been growing at a healthy rate thanks to new market share wins of fibre-to-the-home connections across New Zealand’s equivalent of the national broadband network.

As such analysts have suggested the New Zealand business could fetch around $400 million on an EBITDA multiple of around 7x with established New Zealand telco provider Spark New Zealand Ltd (ASX: SPK) mooted as a potential buyer.

Spark New Zealand posted EBITDA of NZ$1.016b on revenues of NZ$3.6 billion in FY 2017 and could easily fund a deal for Vocus NZ with a mixture of cash, debt, or an equity raising.

Regulatory approval may be a resolvable issue for Spark given the number of new players in the NZ already fragmented internet services market.

Other mooted potential buyers of Vocus NZ include Vodafone or even Telstra Corporation Ltd (ASX: TLS) if it is able to obtain relevant legal approvals.

Otherwise the group could find a private equity or overseas bidder, with Vocus’s management increasingly keen to pay down its debt pile with some restructure moves straight out of the private equity playbook.

The Vocus share price has been rising ever since the asset sale plans were announced, with Hong Kong-based institutional investor Janchor Partners upping its stake in the business to 7.71% as at October 27.

Janchor recently made its mark in Australia by taking a significant stake in Bellamy’s Australia Ltd (ASX: BAL) just before its shares caught a serious updraft over the second half of 2017.

Why Elon Musk's "secret weapon" was the most shorted share in Australia...

On 9 March, the visionary Tesla co-founder and CEO made a bold $63,000,000 to save a large swath of Australia. But in the process, he accidentally revealed the small Melbourne-based company that allows him to consistently make the impossible possible. At one point, this little understood company was actually the single most heavily shorted share in all of the ASX. Yet oddly enough, nine out of 10 analysts call it a screaming BUY! And that includes Motley Fool Australia.

We just isolated this company as Elon Musk's "secret weapon", and think it's dynamic run (up more than double after initially floating shares just two and a half years ago!) is only getting started. For the full story on this company, as well as how to get invested alongside us today, simply click here!

Motley Fool contributor Tom Richardson owns shares of Vocus Communications Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of Vocus Communications Limited and Telstra.  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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.