The Vocus Group Ltd (ASX: VOC) share price has dropped lower on Thursday following the release of a major announcement.
At the time of writing, the telco provider’s shares are down slightly to $4.22.
What did Vocus announce?
When Vocus released its full year results in August, management mentioned that it would soon consider its capital allocation and longer-term corporate structure.
It commented: “The accelerating momentum of the core VNS business, together with the strong performance of New Zealand and well-progressed turnaround of Retail Consumer, means we are now in a strong position to strategically consider our options regarding capital allocation and longer-term corporate structure.”
This morning Vocus revealed that it has decided to take these considerations further and has appointed financial advisers to execute an Initial Public Offering (IPO) of its Vocus New Zealand business.
According to the release, the IPO is expected to be undertaken before the end of FY 2021, subject to prevailing market conditions.
The Vocus board believes that a successful IPO of Vocus New Zealand will provide greater balance sheet flexibility and allow the Vocus Network Services business to invest in core long-term strategic fibre opportunities to extend its network reach, build on its product capabilities, and cement its position as Australia’s specialist fibre and network solutions provider.
It will also provide the board with the ability to review its long-term dividend policy.
What is Vocus New Zealand?
Vocus New Zealand is a fully integrated telco and energy provider that owns a significant national fibre infrastructure network.
It is led by an experienced management team and is an established challenger that is very strongly positioned within the New Zealand market.
The business has delivered consistent revenue and EBITDA growth over the past five years. It has also developed a core competency on the acquisition and integration of businesses that add both customer scale and capability to the existing operation.
The Vocus board believes there are now significant opportunities for organic growth and market consolidation across all market segments that will be better realised if Vocus New Zealand is an independent entity.
No details were provided on how much Vocus expects to raise from the IPO. However, with its FY 2020 results, it revealed that the carrying value of its intangible assets were $298 million.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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