TalkTalk is considering a £1.1 billion takeover offer from investment firm Toscafund – a year after the telco rejected a larger bid of £1.5 billion from the same suitor.
The previous bid valued TalkTalk at double its share price but the company’s board ruled that it did not provide sufficient value to shareholders and customers.
News of the proposal emerged earlier in 2020, prompting Tosca to comment publicly on the matter. The firm said it understood the reasons why its offer was rejected and reiterated its support for the current board and management, adding that the company was in a much better place than when it made its original bid.
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TalkTalk takeover
However, over the past year, Tosca has increased its stake in TalkTalk from 19% to 29% - roughly the same as executive chairman Sir Charles Dunstone – and has returned to the negotiating table with a lower offer of 97p per share.
“The Board has considered the terms of the Proposal and has agreed to progress the Proposal further with [Tosca] along with taking advice from the Company's advisers,” TalkTalk said in a statement to investors, which also outlined Tosca’s desire to gain the support of Dunstone.
“A further announcement will be made as and when appropriate.”
It’s unclear when Tosca’s 2019 bid was made but a possible reason for the lower offer could be the fact that TalkTalk no longer has a fibre network. Last year, the company said it was seeking as much as £1 billion to fund the expansion of ‘FibreNation’ – a wholesale alternative to Openreach for TalkTalk, Sky and other broadband providers. However, FibreNation was sold to CityFibre for £200 million in January.
There has been a surge of interest from private equity firms in telecoms infrastructure in recent times because of the long-term predictable revenues and room for growth.
However, TalkTalk’s customer base of four million customers is still an attractive proposition as the UK market shifts towards convergence and as the company seeks to migrate subscribers from copper to fibre broadband.
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