Vocus Group Ltd (ASX: VOC) has revealed it has plans to IPO its Vocus New Zealand business.
Why is it going to IPO the business?
The company is expecting to execute the IPO before the end of FY21, subject to market conditions at the time.
Vocus’ board considers that a successful IPO of Vocus New Zealand will provide greater balance sheet flexibility to Vocus Group, allowing Vocus Network Services 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 will Vocus be selling?
Vocus New Zealand is a telco and energy provider that owns a national fibre infrastructure network. It has delivered consistent revenue and EBITDA growth (EBITDA explained).
It has delivered organic growth over the years, whilst also boasting of a competency of acquiring and integrating businesses that add both customer scale and capability to the existing operations. The board thinks there are opportunities for organic growth and market consolidation across all market segments.
Summary thoughts
Divesting a smaller segment is an interesting strategy by businesses. It reduces growth avenues, but it should allow the respective businesses to focus on their growth better. I’m not bullish about Vocus’ prospects of beating the market returns over the long term, but this move seems like it could be smart.
However, there are other ASX growth shares I much prefer such as A2 Milk Company Ltd (ASX: A2M) or Pushpay Holdings Ltd (ASX: PPH).
