* KKR has made non-binding bid of A$3.50/share
* Shares traded at A$9.40 a year earlier, before profit downgrade
* Vocus grants due diligence, indicating it may consider offer (Recasts; adds shares, fund manager comment)
By Byron Kaye
July 5 (Reuters) - Embattled Australian internet company Vocus Group Ltd said it will open its books for KKR & Co LP to conduct due diligence, a sign it may accept a $1.66 billion buyout approach dismissed by investors weeks earlier as too low.
After its own $2.4 billion acquisition spree since 2014, Vocus issued a profit warning in May, sending its shares tumbling. KKR's indicative offer soon after, of A$3.50 ($2.66) per share, was two-thirds below its price a year earlier, prompting investors to reject it as opportunistic.
On Wednesday, however, Vocus Chairman David Spence said the company would let KKR conduct due diligence "to explore whether a potential whole of company proposal is available that takes into account the benefits that the plan delivers".
The company already has its own plan in place to "deliver value for shareholders both in the short and medium term", Spence added in a statement.
Vocus shares rose 2.4 percent to A$3.39, still below KKR's indicative price, as investors put the chances of a buyout as slightly higher but not a certainty. The broader market was down 0.4 percent.
"It's worth at least having private equity look at them and see what their assessment is and hopefully realise a slightly higher price," said a fund manager with Vocus shares, who spoke on condition of anonymity because of the sensitivity of the situation.
Granting due diligence showed that the company was "recognising that there is difficulty in getting these obviously difficult, culturally-misaligned businesses together".
While Telstra Corp Ltd dominates Australia's telecommunications and internet markets, smaller rivals such as Vocus are jostling for exposure to a government-led A$40 billion ($30.44 billion) broadband network that is being built around the country.
Though Vocus runs some retail internet brands, such as iPrimus, it has been expanding its physical assets, including the $650 million takeover of a firm building a 4,600 km (2,900 mile) undersea fibre cable between Singapore and the city of Perth.
KKR declined comment. ($1 = 1.3134 Australian dollars) (Reporting by Byron Kaye; Additional reporting by Anusha Ravindranath in BENGALURU; Editing by Christopher Cushing)