May 30, 2019 / 10:55 PM / 5 months ago

Australia's AGL Energy withdraws buyout offer for Vocus

SYDNEY (Reuters) - AGL Energy said it made then quit a takeover play for Vocus as it could not agree on due diligence terms with the Australian telecoms company, which is looking at a separate $2.3 billion offer from Swedish private-equity firm EQT.

FILE PHOTO: The logo of AGL Energy Ltd, Australia's no.2 power retailer, adorns the building of their head office in Sydney, Australia, February 8, 2017. REUTERS/David Gray

AGL, which is seeking growth outside its slow-and-steady electricity retailing business, confirmed it walked away from the offer after the news was first reported by local media. Its shares were down 1.1% while Vocus stock was 0.7% lower.

AGL “was assessing growth opportunities to meet the needs of increasingly connected customers as energy and data value streams continue to converge”, it said in a statement on Friday.

A deal with Vocus would have given AGL data resources that can help enable efficient power use as more homes install smart meters, solar panels, batteries for energy storage and increasingly use electric vehicles.

AGL said it had withdrawn its “non-binding indicative offer after being unable to agree due diligence terms”.

A spokeswoman for Vocus declined to comment.

The move by AGL would have represented “a faster move into the provision of data than we would have thought and ... is a big leap for AGL from its current position as an energy infrastructure owner,” RBC analyst James Nevin said.

“We would prefer to see AGL make the incremental steps ... rather than jumping to the end of that path through an acquisition,” Nevin added.

Sydney-based Vocus saw similar approaches in 2017 when U.S. buyout firm KKR & Co Inc and Affinity Equity Partners made, then abandoned, their own plays for the then struggling telco.

Australia’s fourth-largest internet provider fell into a downward spiral in 2017 and 2018, cutting and missing profit forecasts as its retail businesses battled falling profit margins and increasingly stiff competition.

But Vocus has since shifted focus to network infrastructure, owning and developing fibre-optic cables in Australia, New Zealand and the Pacific, boosting revenue in the division by almost a third over the six months to Dec. 31.

The A$3.3 billion ($2.3 billion) offer from Sweden’s EQT Infrastructure underscores the value in the telco’s path away from discount retailing into network building.

“It is hard to believe they would get a better offer than the one from ETQ,” independent telecoms analyst Paul Budde said.

AGL said it would continue to look for opportunities to support its data-driven growth strategy.

The firm and its rivals have come under pressure from the government to cut power prices to homes and businesses as rocketing energy costs have become a hot political issue, putting pressure on earnings.

“We will continue to see how this develops ... there is a chance that AGL may be able to return,” RBC’s Nevin said.

Reporting by Paulina Duran and Tom Westbrook in Sydney, and Aditya Soni in Bengaluru; Editing by Chris Reese and Himani Sarkar

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