Hull ISP KCOM Agree £504m Cash Takeover by Infrastructure Investor

The incumbent telecoms and broadband provider for Hull in East Yorkshire, KCOM, has provisionally accepted a cash offer of £504m for its business from Humber Bidco, which is a subsidiary of pension fund Universities Superannuation Scheme Ltd (USS) that has a track record of investing in UK infrastructure.

Under the proposal USS will seek to gobble KCOM for 97p per share (a 34% premium on KCOM’s closing price at the end of yesterday’s trade) and this is conditional on at least 75% of shareholders giving their approval, as well as the usual regulatory clearance. KCOM’s board has already recommended that they accept the offer.

The move comes just ahead of KCOM announcing the official completion of their £85 million “Lightstream” deployment, which has expanded their 1Gbps capable Fibre-to-the-Premises (FTTP) based ultrafast broadband network to cover 96% of their addressable network area (200,000 premises) by March 2019; the remaining 4% will gain 75Mbps capable Fibre-to-the-Cabinet (FTTC / VDSL2).

The move would also appear to put an end to any notion of cable operator Virgin Media gobbling up KCOM (here), which always seemed rather improbable given the different regulatory positions of both operators in the UK market.

Patrick De Smedt, Interim Non-executive Chairman of KCOM, said:

“The Board believes that USSL’s offer for KCOM provides, on completion, both meaningful, guaranteed cash returns for shareholders as well as a strong, supportive partner in our endeavours to take the business forward to new successes. The Board believes that the offer of 97p per share represents a compelling opportunity for shareholders to realise an attractive cash value in respect of their shares and recognises the quality of KCOM’s businesses and the strength of their future prospects. For all these reasons, the Board unanimously recommends that shareholders accept the offer.”

Mike Powell, Head of the Private Markets Group at USSIM, said:

“We believe that KCOM is a high-quality business that is well-placed to grow and thrive under private ownership and that is why we have made this compelling offer to shareholders at an attractive premium. With the right capital support and assistance, we believe that KCOM’s management will be able to enhance the quality of its offering, delivering benefits for customers as well as sustainable, long-term returns. USSL’s track record as a long-term and supportive shareholder with extensive experience in regulated sectors makes us an ideal partner for KCOM.”

The announcement, which states that KCOM provides voice and internet-based services to 140,000 consumers and businesses in the region, notes that if all goes to plan then the acquisition should complete by around the middle of 2019. Naturally shares in KCOM have surged to 97p on the back of today’s announcement.