TalkTalk has agreed to a £1.1bn takeover from Toscafund, its second-largest existing shareholder after company founder Sir Charles Dunstone and private equity fund Penta Capital.
The terms of the deal are unchanged from the original bid, valuing each share at 97p. This represents a 16.4 per cent premium on the pre-offer closing price of 83.3p in October, but still a slight discount on the 52-week high of 124.84p.
Shareholders unwilling to take the cash buyout will be able to exchange their stake for shares in the acquired company, which will not be listed on any exchanges.
Philip Carse, chief analyst at Megabuyte, said this alternative share offer may merely be a mechanism to allow Dunstone to maintain his stake in the business as it goes private.
In a statement issued to the London Stock Exchange today, Dunstone said:
“I am pleased to have the opportunity to continue to be a major shareholder in TalkTalk. My decision underlines my passion for the company and the confidence the senior management team and I have about our journey ahead. That said, as the UK transitions to full fibre we have a hugely challenging, but exciting opportunity.
“Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fibre for businesses and consumers nationwide. The Telecoms industry is going through a fundamental re-set and we are keen to play our part in it,” he added.
The takeover deal is subject to regulatory approval, and is expected to close on or before March 31, 2021.
It will also see some leadership changes, with TalkTalk CFO Kate Ferry stepping down. Her replacement will be Phil Eayres, who previously served with the company as an operations director in its consumer division, as well as an independent advisor in the disposal of its FibreNation Subsidiary. Eayres' LinkedIn page also lists stints at South African supermarket Pick 'n Pay, equity fund Bain & Company, and alcohol giant Diaego.
Toscafund had previously offered to buy TalkTalk in 2019, offering 135p per share in a deal that was ultimately rejected. This new, lower price is reflective of the challenges faced by the telecoms sector, not merely by the pandemic, but also by changing consumer habits which continue to impact traditional profitable areas, like fixed-line telephony.
Coinciding with this news, TalkTalk also released its interim results for the six months ending September 30. The figures illustrate the challenges faced by the firm, which saw revenues decline by 6.6 per cent year-on-year to £740m, attributed to lower voice spending, as well as a contraction in the customer base.
Operating profits for the period declined to £20m, down £9m from the same quarter last year. The group said "trading restrictions" and the removal of "call usage caps" during COVID-19 dented income. ®