It's a Hull of lot more: Macquarie offers £563m for fibre network flinger KCOM

6 weeks after board approves pension fund offer, private equity biz trumps bid

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Hull-based fibre flinger KCOM has thrown its lot behind a £563m bid from private equity investor Macquarie, dropping the previously accepted £504m offer from one of the UK's largest pension funds.

KCOM sells broadband services to 140,000 consumer and business customers in the East Yorkshire region.

Back in April, the Universities Superannuation Scheme Ltd (USSL) offered 97 pence per share for London Stock Exchange-listed KCOM and this was seen as a good deal for shareholders. Until now.

Today it emerged a subsidiary of Macquarie has dug deeper to find 108 pence per share, a 49 per cent premium on KCOM's closing stock price on 23 April, the day prior to receiving the submission from USSL.

As such, MEIF 6 Fibre and KCOM said they have “reached agreement on the terms of a recommended cash offer… for the entire issued and to be issued ordinary shared capital of KCOM”.

“The KCOM directors intend to recommend unanimously that KCOM shareholders vote in favour of the proposed offer,” said KCOM in a statement to the City.

Of course this is assuming that another bidder might will not emerge from the shadows to trump that £563m agreement. The Macquarie price put forward is 11 per cent higher than that from USSL.

Macquarie, which has €110bn worth of assets spread across 200 portfolio businesses, is specifically interested in widening third party access to KCOM’s network and expanding fibre beyond the current footprint.

The investor also has biz interests in the locale with Race Bank Offshore Wind Farm off the coast of Grimsby, and Humber port specialist HES Humber Bulk Terminal.

Kcom, formerly Kingston Communications, is involved in a review of operations but senior management there and at Macquarie have yet to work together on “detailed plans or intentions” with respect to the proposed buy or the outcome of the review, including any job cuts.

The company had historic ambitions to broaden its broadband business across the UK, and to win over enterprise cloud customers, but it sold 1,100 km of ducts and fibre networks in 24 cities in 2015 to Fibre City for £90m.

CEO Bill Halbert left in February last year following a boardroom disagreement and profit warnings, adding pressure on the board to find a buyer.

Other suitors, including Virgin Media, are also believed to have looked at KCOM’s books. ®


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