Talktalk Telecom Group PLC (LON:TALK) announced it has agreed a £1.1bn takeover offer by Tosca IOM while its chief financial officer Kate Ferry decided to step down.
Under the terms of the acquisition, shareholders will receive 97p per share in cash, which is a small premium to Wednesday’s 96.25p closing price and a 16.4% premium to the closing price of 83.3p on October 7, which is when the offer period started.
READ: TalkTalk Telecom extends deadline for major shareholder to make a firm offer for the company until December 3
As an alternative, shareholders can choose to receive one unlisted ordinary share in the capital of the offeror, which is a newly-incorporated company, formed by asset manager Toscafund and private equity Penta for the purposes of the acquisition.
Tosca Penta believes that TalkTalk has demonstrated resilient performance during 2020 and notes the material decrease in its share price over the last 12 months, so it concluded that operating in the public listed markets is not optimal for TalkTalk and it can best deliver as a private company.
In a separate announcement, the telecoms group announced that Ferry is to leave after three years and a half in the role so she can live and work in London, while the business remains North-West based.
She will be replaced by Phil Eayres, who has been in the company for six years, more recently as an independent strategic advisor leading the development and disposal of FibreNation, and who was “instrumental” in completing the takeover deal.
In yet another announcement, TalkTalk posted its results for the six months to September 30, when revenue dipped 7% to £740mln though last year’s £15mln profit before tax turned into a £3mln loss.
The internet provider saw 187,000 fibre net adds but did not provide guidance for the rest of the year due to COVID-19 uncertainty.
Past struggles
Michael Hewson at CMC Markets said the deal is hoped to give the telecoms provider "the necessary firepower to continue to make the improvements necessary to better compete with its bigger and better-funded peers".
"TalkTalk has had a difficult couple of years, operating in the shadows of the much bigger competition, of Virgin Media, BT and Sky," he commented.
"Its business model of a couple of years ago, focussing on a no-frills high-speed internet service was bearing some fruit, however this low-value business was also rubbing up against the need to invest in a fibre network that would supply high-speed broadband to up to 3mln homes and businesses, and while the model was starting to bear fruit, it is also capital intensive, which means trying to generate returns in the short term can be difficult."
"Its sale of FibreNation earlier this year raised another £200mln, and in the third quarter the company added another 148,000 clients, but the company still needs to do its best to improve its infrastructure after an outage at the end of May caused a lot of negative headlines for the firm, at a time when more people were starting to work from home."
Shares added 3% to 99p on Thursday morning.
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