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M&A and Deals 02/05/2018

By: Charlene Chen

Vocus Group

On 24 April, 2018, Vocus Group, a Sydney-based telecommunications company, made a formal announcement that it has ended the discussion for selling its New Zealand assets. ‘‘This is a top quality asset and we said at the start of the process that we were looking for a top price”, Vocus chairman Bob Mansfield said. Although Vocus “received multiple offers”, the sales process was shelved due to no offers being perceived as good enough. Also, “the board intends to continue to invest in and grow Vocus NZ to enable that business to realize its strategic potential for shareholders.”

In fact, this news may come as no surprise. In spite of concerns for its balance sheet from investors and analysts, Mr Mansfield still told the market that there was no plan for the equity raising. Originally, Vocus Group hoped to get its debt under control with this deal, the first pitch started in November 2017 to potential buyers (such as Vodafone NZ and Spark New Zealand).

Yet now we can see that Vocus has opted to renegotiate with lenders. According to an announcement last Tuesday, it is likely to reduce its debt load by getting a full refinancing of debt facilities as well as adjusted debt covenants. Mr Mansfield is optimistic about Vocus’s debt levels, saying “it was manageable,” whilst admitting it would not be easy to get things back on track.

Macquarie Group

According to a substantial shareholder notice to the ASX (Australian Securities Exchange) on 23 April, 2018, Mercantile Investment Company has lifted its 9.1% stake in the Mark Bouris-chaired Yellow Brick Road to around 19.9% – Macquarie Group is believed to be the seller.
Bloomberg data reveals that Macquarie’s owned about 7.8% of Yellow Brick Road after the acquisitions of the shares, dropping from 18.4% previously.
Yellow Brick Road (YBR), a mortgage lender and wealth manager founded in 2007 by Mark Bouris, the former Celebrity Apprentice Australia star, listed in 2011 aiming to take on the big banks. Yet years of patchy performance has let some investors down. YBR has seen a dramatic crash in its share price in recent years, falling to 13.5c from their previous value of 69c. Last year the company just turned a profit ($2 million) for the first time since listing – after major restructuring and a series of acquisitions (including Vow Financial, the mortgage aggregator).

While Macquarie Group seems to have lost faith in its YBR investment (despite using it as a systematic source of mortgage over many years), for Mercantile the attraction could be the value of YBR’s loan book ($46 billion) and its distribution channels for mortgage. However, whether Sir Ron Brierley will launch a takeover offer still remains unclear.

PwC Australia and PPB Advisory

PwC Australia, the big four accounting giant, is considering acquiring PPB Advisory, a local insolvency practitioner. This merger was confirmed by a PwC spokeswoman, “PwC and PPB Advisory have long enjoyed a mutually respectful relationship, and we are currently exploring possibilities for how we might work even more closely together in the future.” On the other side, a PPB spokeswoman also confirmed “exclusive discussions” with PwC were “progressing well”. Yet some sticking points remains as the deal is nearing an end and talks between the two companies are still waiting for a final sign off from the PwC board.

While the PwC Australia board is voting on whether or not to proceed with the deal, accounting firm Deloitte is waiting in wings. Deloitte has reached out to PPB about an alternative deal recently, and showed interest to merge with PPB should the deal with PwC not eventuate.

Source: SMH, AFR, Business Insider, The Australian

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