Shares in telco, Vocus Communications shed more than 14% of their value yesterday after the company joined Fairfax Media in being rejected by private equity suitors.
The shares were down 14.6% at the close at $2.75 after being down more than 22% at one stage yesterday in the wake of the news.
An earnings downgrade also didn’t help investor sentiment.
Last week Vocus revealed it will incur a non-cash goodwill impairment of $1.53 billion in 2016-17 across both the Australian and New Zealand businesses and its unaudited profit will miss guidance at $152.3 million, below the $160 million to $165 million range given earlier this year.
Unaudited underlying earnings are expected to hit the lower end of the guidance target of between $365 million and $375 million at $366.4 million.
Vocus’ full-year results will be out on tomorrow morning.
In May and June, Fairfax Media was courted by private equity groups in the form of TPG and Hellman and Friedman who after due diligence, walked away.
Now Kohlberg Kravis Roberts & Co and Affinity Equity Partners have failed to score a hit with the board of Vocus Communications and are out of the race for the telco.
Unlike Fairfax where TPH and Hellman and Friedman declined by make a firm offer, KKR and Affinity pitched offers that proved unacceptable to the teleco’s board.
The pair of private equity giants had each made $3.50 per share, or around $2.2 billion, non-binding offers.
Vocus said yesterday it had now ceased discussions with both parties after neither was able to make an offer acceptable to the board.
"The board’s focus continues to be to act in the best interests of all shareholders," Vocus chairman David Spence said.
"Following the receipt of the initial, indicative proposals from the two parties, we believed it was in shareholders’ best interests to grant those parties the opportunity to conduct non-exclusive due diligence."
Mr Spence said Vocus continued with its transformation program, first outlined in June, throughout the private equity due diligence process.
"The process with the bidders has now concluded and the board is looking forward to working with management to deliver improved returns for shareholders over the medium and long-term future."
Vocus said an important factor in the board ending the sale process is the company’s guidance for 2017-18
The firm is forecasting revenue to grow to between $1.9 billion and $2 billion, while underlying earnings before interest, depreciation and amortisation are expected to tick up to between $370 million and $390 million.
"This forecast growth is in spite of the headwinds created by the deferred subscriber acquisition cost benefit to EBITDA of approximately $41m in FY17," the company said in a statement in the Australian Securities Exchange.
It added that, notwithstanding competitive market conditions and increased costs associated with the migration of customers to the NBN, it’s confident it can deliver a return to sustainable organic growth after a "year of transition" in fiscal 2017.
