Yes it depends on how much Vocus AU want for Vocus NZ.
The article I shared touts a possibly expectation of $700M even though Vocus are said to have been prepared to sell the NZ business for $500M only 18 months ago.
If they want $700M then forget about Sky buying them and good luck to them for the IPO. If they are willing to sell for closer to the $500M figure, then I think opportunities are possible.
Perhaps Sky would struggle to get the required ~$500M finance to buy Vocus NZ...But then again, if the Business Case stacks up I don't think it would be impossible. Sky are already moving into broadband, and have made noise about mobile. In other words, they want to be like a telco (and I support that endeavour).
Why not fast track that by purchasing Vocus if they can get it for a fair price? Spark's debt is a touch under half of their annual revenue. If Sky borrowed $500M to buy Vocus, combined revenue would be north of $1B. So the debt to revenue ratio would not be out of this world compared to what we see elsewhere. And money is very cheap right now.
On Day 1 EBITDA would rise to $200M - $220M. Sky would inherit ~200K broadband customers and then have their own huge customer base to market Sky TV/broadband/mobile/energy bundles to. It does not take much of a stretch of the imagination to see combined entity EBITDA rising to $300M. A conservative EBITDA multiple of 7 would value the new business north of $2B ($1.15 per share).They would quickly relegate Vodafone to third place and be a legitimate rival to Spark.
If Sky can get the money together to buy Vocus NZ it removes issues that trying to do a merger would create. With Vocus NZ going for top dollar and our shares way undervalued, using equity would not be good for Sky shareholders.
Other interested parties wanted to buy Vocus NZ but only offered ~$400M if media reports are correct. I think Vocus is worth more to Sky than it is to Private Equity though.
For Sky, buying Vocus: 1 + 1 != 2. It equals 3 or more given the huge Mega Bundle opportunities.
I would be very disappointed if Sky was not trying to make something happen here. If they can't secure the finance required to do a deal then so be it, but this is the kind of opportunity they should be actively engaging in imo.
We already have a $200M banking facility yet to be touched. If the banking syndicate is prepared to let Sky borrow $200M as a standalone, then surely they would consider lending more for a business proposal such as this? Money is cheap right now, and this could be a way to significantly enhance shareholder value.
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