Independent directors at UK broadband provider TalkTalk, as well as chairman and largest shareholder Charles Dunstone, have accepted a non-binding and preliminary £1.1 billion (US$1.5 billion) takeover bid that will see the company delist from the London Stock Exchange (LSE).
Ownership, should the deal go ahead, will fall into the hands of Hedge fund Toscafund Asset Management (TAM) and private equity firm Penta Capital, which created "Tosca Penta" as a separate entity to carry out the acquisition.
Dunstone, believed to hold around 30% of TalkTalk, will see his shareholding roll over into the new controlling entity.
"I am pleased to have the opportunity to continue to be a major shareholder in TalkTalk," he said. "Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fiber for businesses and consumers nationwide."
Darn, we could've got more
The offer, worth 97 pence ($1.32) per share in cash, was first put formally on the table by TAM on October 7. TAM is estimated to own a similar-sized stake in TalkTalk to Dunstone.
After what seemed like a bit of humming and hawing, TalkTalk's independent directors and Dunstone finally accepted the bid, although it must have grated a little. TAM apparently made an informal offer previously of 135 pence ($1.86) per share, which was rebuffed.
TalkTalk's independent directors were advised by Barclays and Deutsche Bank to take the lower offer as the business was deemed to require substantial investment to grow. The thinking was that TalkTalk might struggle if it remained a listed entity.
Tosca Penta, in a statement, said TalkTalk had demonstrated "resilient performance during 2020," but also noted the "material decrease in its share price over the last 12 months."
It concluded that operating in the public listed markets was "not optimal for TalkTalk and that the next stages of its investment, strategy and long-term growth can all be best delivered as a private company, without the significant governance, cost, regulatory and financial reporting burdens of a company listed on the LSE."
It also thought TalkTalk will benefit from access to different forms of equity and debt financing structures that are "not readily available to listed companies."
Price is right?
The 97 pence per share is a 16.4% premium to TalkTalk's share price on October 7, and a 17.3% premium to the volume-weighted average price for the previous six-month period. During this morning's trading on the LSE, however, TalkTalk's share price rose slightly above 99 pence ($1.35).
According to Bloomberg, the Tosca Penta undertaking is not binding if TalkTalk gets another offer of more than 115 pence ($1.56) per share. If that doesn't happen, Tosca Penta hopes to wrap up the deal during next year's first quarter.
— Ken Wieland, contributing editor, special to Light Reading