Vocus Communications set to raise $650m to buy NextGen
Vocus Communications is preparing to raise $650 million to buy NextGen Networks, sources told Street Talk.
Vocus Communications is preparing to raise $650 million to buy Ontario Teachers Pension Plan and CIMIC Group's $1 billion cables and data centre owner, NextGen Networks, fund manager sources told Street Talk on Tuesday.
Credit Suisse is tipped to handle the deal, which is expected to take place as early as Wednesday subject to market conditions.
It's understood Vocus' camp started lining up a select group of fund managers to back the raise on Tuesday.
NextGen is expected to be worth more than $1 billion. Macquarie Capital is advising NextGen.
As Street Talk revealed a fortnight ago, Vocus has been closing in on NextGen for months with Ontario Teachers seeking an exit.
NextGen would give Vocus an inter-city fibre network that it does not already own. Vocus currently uses NextGen's inter-city infrastructure.
The deal is unlikely to surprise Vocus' major shareholders or sell-side analysts.
UBS analysts said in March that NextGen was Vocus' most likely next move. While the analysts said Vocus did not need to do the transaction and there were potential regulatory hurdles, it would cover over a major point of difference between Vocus and its larger competitors.
It would be Vocus' second big M&A transaction in the past year. It acquired M2 Group in a $3 billion merger earlier this year.
When Ontario bought its 70 per cent NextGen stake in June 2013, the deal valued NextGen at close to $1 billion. Since then it too has been a victim of consolidation with many of its biggest customers bought up by TPG, which owns its own inter-capital fibre network.
Industry sources reckon the business has struggled since Ontario took the keys, however it would still likely be a big bite for Vocus with its debt already at about two-times earnings.
The company's biggest investors include founder and executive director James Spenceley.
The mooted transaction also continues Credit Suisse's purple patch. The Swiss bank oversaw Mayne Pharma's $888 million cash call, Australia's largest equity raising so far this year, with UBS on Tuesday.
