https://ift.tt/Xx6Gng0
Swoop has thrown its hat in the ring to acquire publicly listed Vonex and has had its offer shut down, but it still has a chance to improve its offer.
In June this year, Maxo Telecommunications announced its proposal in a statement to the Australian Securities Exchange (ASX) to acquire Vonex for an all-cash deal valued at $34.4 million, priced at $0.0375 per share.
On 5 September, Swoop announced on the ASX it had proposed a combined cash and scrip offer to acquire Vonex for $0.04 per share, which it claimed was superior to a previous offer from MaxoTel of $0.0375 per share.
A day later, Vonex replied with its own statement, confirming Swoop’s proposal and claimed the offer price would be payable with a combination of 25 per cent cash and fully paid shares in Swoop valued at $0.23. The offer was also said to be conditional on credit approval from Swoop’s lender and the execution of a binding scheme implementation deed.
However, Vonex is yet to receive a draft of the proposed deed and said in its statement that “it is unclear what other terms and conditions may be attached to the Swoop offer”.
“Considering the conditionality and uncertainty around the Swoop offer there is no certainty that it will lead to a binding offer from Swoop,” the statement said. “Accordingly, the Vonex board does not consider the Swoop offer to be superior to the MaxoTel offer and shareholders should take no action in relation to the Swoop offer.”
Vonex also provided the text of a letter in its statement that it sent to Swoop on 5 September that, while turning down the offer, outlined its willingness to continue discussions with the telecommunications provider.
The letter text was released as Vonex claimed it believed its discussions about Swoop’s proposal were to be confidential. As Swoop made its intentions public on the ASX, Vonex said it provided a copy of the text of the letter “to ensure the market has the full context”.
“We do not believe the indicative offer is superior to the Maxo scheme, but believe there is a reasonable likelihood that it could be crystallised into a superior offer within what we anticipate are Swoop’s likely commercial parameters and so are willing to entertain a further proposal addressing our concerns, if you wish to proceed,” the letter text read.
“Key challenges from our perspective are the need for credit approval, the minimal nominal price increase (under 7 per cent) which is compounded by potential deal uncertainty, uncertainty around Swoop’s equity value and anticipated shareholder desire for a specific mix of cash and equity.
“Since our original conversations, and our agreement to the Maxo Scheme offer at 3.75c cash, we have had substantial movement on the Vonex share register. In our view, that increases the likelihood that a larger number of shareholders would now prefer a cash deal, than at the time we originally discussed Swoop’s interest in Vonex.”
Some of the guidelines Vonex would consider to be a superior proposal include a formal confirmation of unconditional and irrevocable finance approval, a 100 per cent cash option and a “minimum ‘smoothing’ for recent movements of the 30 day volume-weighted average price for the Swoop share component of the offer, rather than the flat $0.23.
“We understand the desire to have an equity component, particularly given our previous discussions around the value of synergies being captured in that equity component. However, given the complexities and inherent uncertainty in equity, an equity offer at such a marginal price differential does not constitute a superior offer (and, without a significant premium, will necessarily require a full or at least majority cash option alternative),” the letter text said.