ISP TalkTalk Opens £1.1bn UK Takeover Talks with Toscafund

Broadband provider TalkTalk has today announced that they have received a preliminary and non-binding takeover proposal from Toscafund Asset Management (TAM), which intends to pay 97p for every share (valuing the deal at around £1.1bn). The new owner, if successful, would seek to take the ISP private.

The provider, which is currently home to around 4.2 million broadband customers but which doesn’t have a fixed line network of their own, was last year rumoured to have rejected an allegedly much larger £1.5bn (135p a share) bid from Toscafund (here). But that was before COVID-19 and at the time they still owned a growing fibre optic network of their own (FibreNation), which has since been sold to Cityfibre for £206m.

At present Toscafund is one of the provider’s largest shareholders and controls around 30% of the ISP, which is roughly the same stake as TalkTalk’s Founder and Executive Chairman, Sir Charles Dunstone. Suffice to say that any agreement would need to get the nod from Sir Charles.

At the time of writing this development has already caused the provider’s share price to jump by over 19% from 82.90p yesterday to 99.22p now. Meanwhile TalkTalk’s board has considered the terms of the proposal and agreed to further discussions, although no decision has been taken and it’s possible this may yet attract other bidders (e.g. Vodafone might see them as a quick way to grow their similarly budget conscious fixed line base).

TalkTalk’s Statement

A further announcement will be made as and when appropriate.

In accordance with Rule 2.6(a) of the Code, TAM is required, by not later than 5.00 p.m. on 5 November 2020, to either announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.

This announcement has been made with the consent of TAM.

There can be no certainty that a firm offer will be made for the Company by TAM even if the pre-condition stated above is satisfied or waived. TAM reserves the right to vary the form and/or mix of the consideration described in this announcement. TAM also reserves the right to make an offer for the Company at a price less than 97 pence per share: (a) with the recommendation or consent of the board of the Company; (b) if the Company announces, declares or pays any dividend or distribution to shareholders in which case Offeror reserves the right to make an equivalent reduction to the proposed offer price; (c) if a third party announces a firm intention to make an offer for the Company on less favourable terms than the Proposal, or (d) following the announcement by the Company of a “whitewash” transaction pursuant to the Code.

As a consequence of this announcement, an offer period has now commenced in respect of the Company in accordance with the rules of the Code and the attention of shareholders is drawn to the disclosure requirements of Rule 8 of the Code, which are summarised below.

Arguably TalkTalk’s most strategic value is in their customer base (business and residential), but whether or not that alone is worth the asking price is another matter. Clearly TAM thinks so and we’d be very interested to see what they’d do differently from the current owners. Today’s market remains aggressively competitive and COVID-19 has helped to highlight the importance of broadband connectivity.