No one wants to offer real money early in takeover bids these days for companies, especially private equity groups.
The takeovers code of course allows potential bidders to make indicative bids, and there’s nothing to stop them abandoning their offers – as we saw with two offers pitched for Fairfax Media from TPG and Hellman and Friedman who then quickly abandoned them after due diligence.
Now Telco, Vocus Group has received one from Hong Kong-based private equity group, Affinity Partners which yesterday lobbed a non-biding offer at $3.50 a share to match one made a week or so ago by US buyout giant, KKR.
The $3.50 indicative offer values Vocus at $2.2 billion and won’t be the last if the due diligence stacks up. KKR was granted non-exclusive due diligence last week. Affinity will follow up with its own diligence.
The indicative bids means the bidders don’t have to lay out actual cash until need be, and more importantly have more room for wriggling on price and conditions once they have seen the company’s books.
That wriggle room includes a way to withdraw if the books and company budgets and forecasts prove problematic, which seems to have been the main concern at Fairfax.
Vocus’ shares closed 2.6% at $3.54 a share yesterday following the announcement as punters and situation hedge funds got a sniff of an auction.
But that’s what they thought would happen with Fairfax and chased the shares up to $1.26 in May. Fairfax shares are now well under $1 at 95.5cents and the company is heading for its annual results and more details on its Domain spin-off.
