June 17, 2019 / 1:28 AM / 3 months ago

Australia's Vocus tumbles after AGL backs out of offer for second time

(Reuters) - Australia’s AGL Energy Ltd withdrew a proposal to buy Vocus Group on Monday, just days after it offered A$3.02 billion ($2.08 billion) for the telecoms firm, knocking Vocus shares down by a third.

The withdrawal, which came weeks after AGL had dropped an earlier approach, made it the fourth potential suitor to back away from an offer for Vocus over the past two years.

Analysts had been skeptical about the benefits AGL would derive from a takeover of Vocus, which is in the midst of turning around its business.

Vocus shares plunged about 32% to A$2.94 on the news, its lowest since September 2018 and significantly lower than AGL’s A$4.85 a share indicative offer. AGL shares rose as much as 3.3%.

“A lot of shareholders could jump to the conclusion that there is something wrong here at Vocus,” said Michael McCarthy, chief market strategist at CMC Markets.

“In less than a week if they can turn around on something like this it is hard to imagine a lot of due diligence was done,” he added.

AGL initially said its second proposal, which was pitched below a A$3.3 billion bid withdrawn by Swedish private equity firm EQT Infrastructure, would be accretive to earnings.

“We are no longer confident that an acquisition of Vocus at the proposed terms would represent sufficient certainty of creating value for AGL shareholders,” AGL’s Managing Director & CEO Brett Redman said in a statement.

Vocus CEO Kevin Russell said in a statement Australia’s fourth-largest internet provider had ceased discussions with AGL.

“As we have repeatedly said, this is a three-year turnaround. We have great confidence that our strategy and ability to execute our business plan will deliver significant value to our shareholders in the medium to long term,” he said.

Vocus reiterated its underlying EBITDA for the 2019 financial year.

Earlier in June, AGL warned its fiscal 2020 earnings will be up to A$100 million lower because its Loy Yang A power station in Victoria would be offline until December due to damage caused by an electrical short.

Reporting by Nikhil Kurian Nainan and Niyati Shetty in Bengaluru; editing by Richard Pullin

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