Australian telco sets up board committee to evaluate private equity firm’s unsolicited bid.

Vocus on Wednesday was subject to an unsolicited takeover bid from U.S. private equity firm KKR that values the Australian telco at A$2.16 billion (€1.46 billion).

Vocus has set up an independent board committee to evaluate the offer, which is contingent upon various conditions, including Vocus maintaining a normalised level of working capital, keeping its net debt at or below A$1.1 billion, and hitting its EBITDA guidance of A$365 million-A$375 million for the 12 months to 30 June.

"The Vocus board remains fully committed to acting in the best interests of, and maximising value for, Vocus shareholders," Vocus said, in a stock exchange announcement.

Vocus, which provides telco services to wholesale, business and government, has dramatically increased its scale and reach in recent years, thanks to its acquisitive strategy.

Last June, it bought fibre backhaul provider Nextgen Networks for A$807 million. In September 2015, it merged with M2, creating Australia’s fourth-largest player and the third-largest in New Zealand; that deal also brought in current CEO, Geoff Horth. Earlier in 2015, Vocus and New Zealand incumbent Spark agreed to form a fibre construction joint venture called Connect 8.

It has been far from plain sailing for Vocus though.

In May this year, the company lowered its full year revenue guidance to A$1.8 billion from A$1.9 billion, following a contract review related to a number of large projects. It also lowered its underlying EBITDA guidance to A$365 million-A$375 million, from A$430 million-A$450 million, due to the aforementioned contract review, and other contributing factors, such as volatile weather affecting the energy sector.

KKR’s bid is for 100% of Vocus, and shareholders will receive A$3.50 per share. As well as normal due diligence, the offer is subject to approval from Vocus’ board and shareholders, as well as various regulators, including Australia’s Foreign Investment Review Board (FIRB).

"There is no certainty the indicative proposal will result in an offer for Vocus, what the terms of any offer would be, or whether there will be a recommendation by the Vocus board," Vocus said.