well, that was quick. Less than a week after announcing it had made a tentative offer to acquire telco Vocus Group in a multi-billion deal, AGL Energy has withdrawn the offer, citing uncertainty that the acquisition offered good value for AGL shareholders.
AGL had hoped that the acquisition of a large telecommunications group would open up new products that could be offered to AGL customers, and a new avenue for its existing products, fulfilling predictions that the utility and telco industries would effectively merged as both became increasingly digitalised.
The focus on Focus was to look at maximising value and increasing customer loyalty, as well as providing AGL to key data infrastructure that would allow for innovative alignment of energy and data services, including the creation of new business models.
This is particularly crucial for AGL, which operates a generation portfolio that includes the ageing Loy Yang brown coal generator, which has recently suffered from prolonged outages, along with the Liddell Power Station that is slated to close in 2022, and is facing a grid when power is increasingly decentralised.
AGL had offered to purchase all outstanding shares of Vocus Group for $4.85 per share, in a deal that valued the telco at more than $3 billion, depending on due diligence.
But after a week of doing that due-diligence process, AGL has decided to withdraw the offer for Vocus but says it will continue to look for opportunities to align its energy services with data services as it works to diversify its customer offers.
“AGL is exploring investment opportunities across three focus areas: optimising our existing portfolio for performance and value, evolving and expanding our core energy markets offerings, and creating new opportunities with connected customers,” AGL CEO Brett Redman said in a statement to the ASX.
“We believe there will be material opportunities for AGL as energy and data value streams continue to converge and the traditional energy sector accelerates its transformation. The approach to Vocus reflected our view that the Vocus asset base attributes that could support the execution of this strategy and benefit our customers.”
“However, we are no longer confident that an acquisition of Vocus at the proposed terms would represent sufficient certainty of creating value for AGL shareholders”.
“We would like to thank the Vocus board and management team for their assistance over recent weeks”.
Vocus Group provides business and wholesale network and internet services across Australia and New Zealand. It also operates almost two dozen data centres across the Pacific region, that AGL saw as potentially benefitting its wholesale generation portfolio.
Vocus owns a range of brands that service commercial, government, small business and residential customers, including consumer-focused internet service providers iPrimus and Dodo, the latter of which already offers some energy services.
The withdrawal of the takeover offer is the second in the space of as many weeks, following the withdrawal of an earlier offer from Swedish consortium EQT Infrastructure. EQT had likewise withdrawn its offer within a week of commencing a due-diligence assessment.
Electricity retailers have sought to diversify their business offerings, as the emergence of distributed energy systems and pressures to lower the energy costs for end consumers has placed significant pressure on the traditional business models.
“AGL’s interest in Vocus is consistent with AGL’s strategy to meet the needs of increasingly connected customers as energy and data value streams converge and the traditional energy sector transforms – and aligned with AGL’s capabilities in integrating and managing complex assets and customer portfolios,” AGL said in a statement to the ASX announcing its initial offer for Vocus.
The alignment of energy and data services has been a growing trend in the Australian market, following junior telco amaysim acquiring retailer Click Energy in 2017 and Origin Energy beginning to offer broadband internet services, and ongoing speculation that Telstra may enter the energy market.
The trading of Vocus Group where down by more than 30 per cent following the withdrawal of AGL’s offer.