Vocus (ASX:VOC) is closing in on the potential sale of its business in New Zealand as well as its data centre footprint in Australia.
In August, Vocus announced a review of non-core Australian assets for potential divestment options.
According to an investor update issued on 23 October, the Vocus board has determined that the Vocus New Zealand (VNZ) business will be prepared for sale. The company is now finalising the appointment of advisors and is aiming to complete a sale by the end of the 2018 financial year.
Likewise, the board has also progressed its review of the non-core Australian assets, and has appointed advisors for the sale of its Australian data centre assets. Other non-core Australian assets will continue to be evaluated with regard to potential divestment or disclosure.
“Since the announcement of the assets review, further inbound approaches have been received on assets across the entire Vocus portfolio,” the company told shareholders. “Net cash proceeds from proposed divestments will materially reduce group debt levels, leverage ratio and provide strategic optionality.”
The move to sell off large chunks of its business comes at a difficult time for the publicly-listed telecommunications provider, which is set to face down a proposed class action by law firm, Slater and Gordon.
The proposed class action, first announced in September, alleges that the publicly-listed telco misled shareholders over its FY17 financial guidance.
In August, Vocus revealed its preliminary, unaudited financials for the 2017 financial year, showing that the company brought in a net profit after tax (NPAT) tally that came in $152.3 million below the company’s guidance range of $160 million to $165 million.
According to the Australian telco, this downgrade was primarily due to higher than forecast net finance costs and a higher effective tax rate at 33.4 per cent.
This followed the company’s move in May to wipe off $100 million from its revenue target for the financial year ending 2017, blaming the forecast downgrade on lower than expected billings in its enterprise and wholesale business, and re-jigged terms on a number of large projects.
Now, the proposed class action, which is set to be brought by Slater and Gordon in partnership with shareholder claim management and funding-service provider, Investor Claim Partner (ICP), is set to see the telco’s actions come under scrutiny.
Vocus found itself at the centre of a bidding war in July, after receiving an acquisition proposal from Asian private equity firm, Affinity Equity Partners.
Just a month earlier, Kohlberg Kravis Roberts & Co (KKR) revealed plans to acquire Vocus Group, with the US-based private equity firm tabling a $2.1 billion buyout proposal.
Ultimately, Vocus told its shareholders that although the bidders indicated support for its management’s strategic plans and transformation program throughout the due diligence process, both bidders advised that they were “unable to support a transaction on terms acceptable to the board”.
At the same time, the company has become entangled in a legal case brought against it, and its subsidiary, Nextgen Networks, by IBM, over the companies’ respective roles in the troubled 2016 eCensus portal project, for which IBM was the tech lead.
In a legal action filed with the NSW Supreme Court late last year, IBM Australia alleges that Nextgen Networks and Vocus Communications were negligent and in breach of contract in relation to their work associated with the 2016 eCensus portal.
The court documents also reveal that IBM wants Nextgen Networks to pay for the settlement it reached with Australian Government over the Census troubles, alleging that Nextgen Networks is liable for the claim brought against IBM by the Australian Bureau of Statistics (ABS).
While the value of the settlement has not been disclosed, it is understood to be worth millions.
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