Telco provider Vocus to list on ASX through $20 million reverse takeover deal

Telecommunications firm Vocus says its acquisition by a listed investment fund is another sign that companies in the IT sector are looking for ways to acquire or be acquired in order to expand.

Vocus chief executive James Spenceley also says the $20 million deal, which will result in the company also being listed on the ASX, will see the company become a bigger player in the wholesale market.

Vocus announced yesterday that First Opportunity Fund Limited, which is managed by Investec Wentworth Private Equity, would purchase the company through a cash and share deal. In addition, a $6 million share placement and public capital raising will be undertaken.

The current management will remain in place.

Spenceley says this deal will allow the company to grow beyond its current size and embark on projects they couldn’t have pursued previously.

But he also says the move comes as companies within the IT sector are either searching for acquisitions, or are looking to be acquired themselves.

“It would certainly seem to be a trend, with companies acquiring particularly in the end-user space. It’s certainly a trend that seems to be heating up, and it seems to be due to strategic reasons on behalf of the acquirer. Those companies which are doing well are getting really good valuations and are making the most of them.”

Vocus, which recently ranked sixth in SmartCompany’s Start Up Awards, was started in 2007 by Spenceley and Paul McConnell.

The company offers wholesale telecommunications services to smaller businesses, with both founders attempting to shake up the market dominated by larger players.

It has continued to grow each year since its formation, with turnover during 2008-09 of $5.2 million along with a profit of $947,000 before tax. The pair have previously said they would like to expand the business, possibly into New Zealand or the Pacific Islands.

“We are really excited about the move. I think we’ve grown so quickly in the last two years, and I think to continue to grow we need to take that next step and access capital. We haven’t raised any money since starting the business, and it’s just really about growing further in the industry.”

“We want to take our business from a medium-sized company in the telco space to a larger one, and we think this is the way to do that.”

Spenceley says they will be able to pursue some of their growth goals by partnering with Investec, who will provide some of its talent to the company’s board.

“One of the nice things about the deal, and one of the reasons we looked at this particular opportunity, was the calibre of the people involved at Investec. They’re the most respected investors in Australia, and we are keeping two of the guys on our board because of their experience.”

“They have the ability to raise money as a listed entity and we are really excited about that.”

David Spence, former chief executive of OzEmail and managing director of Unwire will take one the role of chairman. Spenceley says he and board members from Investec will provide significant value to the business, but also maintains the company’s focus will remain the same.

“The original Vocus shareholders still have control of the company. It’s very much still Vocus-controlled in terms of business and out network of customers, but we’re a publically-listed entity now and we certainly have shareholders, of which Investec will become a major one. “

“But we’re still pretty focused on getting the transaction across the line, which should happen around 22 June. Our goal is to get to that point, and then we will view some opportunities we have.