Vocus Group’s consumer energy business and data centres are expected to be the first on the chopping block as the telecommunications provider looks to sell non-core assets.
Industry experts said the most obvious businesses to sell were its portfolio of 20 data centres, which could be worth $160 million and were the subject of preliminary sale negotiations this year, and the consumer energy business, where it bundles gas and electricity with its internet services from providers such as Dodo.
The telecommunications provider flagged it had received numerous approaches from interested parties for several of its assets, while private equity giants Kohlberg Kravis Roberts & Co and Affinity Equity Partners were doing due diligence on the company.
Vocus said the approaches identified Australian assets of material value that may be non-core. The board will review Vocus’ portfolio and consider its options.
Asset sales would well strengthen the telco’s balance sheet. Vocus did not declare a final dividend so it could investment in the business, including the Australia Singapore Cable and reduce overall debt.
Credit Suisse and Goldman Sachs are Vocus’ go-to investment banks but it’s believed no mandate has been issued yet.
During 2016-17, Vocus increased the number of energy services it had in operation to 161,000, up 14,000 in the period. Energy made up about 27 per cent of Vocus consumer revenue in Australia.
Vocus data centres were about 7 per cent of the company’s overall revenue. Australian Securities Exchange-listed data centre business NEXTDC was rumoured to have expressed interest in Vocus data centres.
However, it’s not the only data centre business on the market.
RBC Capital Markets and UBS have begun drumming up interest for Metronode, as revealed by The Australian Financial Review‘s Street Talk column, the data centre business owned by Ontario Teachers’ Pension Plan that Vocus did not buy as part of its $807 million purchase of Nextgen in 2016.
Metronode is much larger than Vocus’ data centre business, believed to be worth $1 billion, and is understood to be of higher quality.
Vocus management has made a habit of trimming the fat over the years as it continued to acquire assets. It has a history of reviewing and then dumping assets it believes aren’t core, such as Aggregato, a US prepaid card venture, and Connect 8, a fibre construction joint-venture in New Zealand.
Vocus chief executive Geoff Horth would not be drawn on the assets the company had received approaches for and which ones it will sell.
“I’m not going to call out the assets. Except to say they’re specific to our Australian business,” he said.
The comment puts to rest rumours Vocus had been reviewing its New Zealand assets.