An expert says SA Inc might see MTN enter the fray for Telkom’s hand after the mobile operator yesterday confirmed that it had received an unsolicited non-binding indicative letter from a consortium for the acquisition of a controlling stake in it.
The consortium is led by its former CEO Sipho Maseko, Afrifund Investments Proprietary Limited, comprising Axian Telecom and the Government Employees Pension Fund (GEPF), managed by the Public Investment Corporation (PIC).
Telkom’s share price yesterday surged to a high of R33.49 in morning trade after the announcement. But the share price in the past year had decreased by 29.6%.
“Telkom continues to pursue its strategic value unlock initiatives, and should such initiatives result in any developments that may have a material effect on the value of Telkom’s shares, information on such arrangements will be disclosed to shareholders,” the group said.
Telkom has become the takeover target for different companies because of its extensive infrastructure.
Earlier this year MTN abandoned talks of a proposed takeover bid after the mobile operator entertained a rival offer from wireless broadband company Rain.
Yesterday the group said that it was seeking the consortium to provide further clarity on several matters and it was assessing the merits of the takeover bid under its fiduciary duties.
“In this regard, the company has requested the consortium to provide further clarity on several matters, including the proposed offer price and certainty of funding.
“As such, discussions remain of an exploratory and non-consensual nature… There being no certainty that the outcome of these discussions will result in a transaction,” it said.
Two weeks ago Bloomberg broke the news of the possible bid, “Africa’s top fund manager, ex-Telkom CEO, Axian mull Telkom bid”.
Telkom said due to the continued detailed media speculation and Telkom awaiting further clarity, shareholders we re advised to exercise caution when dealing in the company’s shares until a further announcement is made.
World Wide Worx CEO Arthur Goldstuck said yesterday it would be surprising if MTN did not rejoin the bidding.
“MTN has wanted Telkom for some time and its current share price makes it an attractive target,” he said.
He also said a viable takeover bid would boost the Telkom share price significantly.
“Given that the initial bid already priced the shares at a premium to the existing price, and was rejected as too low, it seems that any accepted bid would be more attractive and would, therefore, boost the share price substantially," he said.
The Sunday Times publication reported that the consortium offered R46/share for a stake in Telkom, but that was immediately rejected as being too low.
Goldstuck said Telkom today was a treasure waiting to be discovered by the right partner or owner.
“A decade ago it lost an opportunity to become the standard bearer of the future of communication when the government shot down the sale of a 20% stake to Korea Telecoms. It remains a superb target for acquisition and, in the right hands can be a formidable rival to the big two networks,” he said.
Anchor Capital said, “Mr Maseko has a clear view on the potential value embedded in the assets that Telkom has. Prior to his exit, he articulated a value unlock strategy based on the point that equivalent assets to many of those in Telkom trade at significantly higher valuations than that of Telkom.
“Since his departure, Telkom has failed to progress that value unlock strategy, despite repeated assurances from management that it is a work-in-progress.”
Anchor said Axian Telecom had appeared on the scene in recent years, snapping up unwanted assets as other global players rationalised their portfolios and exited unwanted regions.
“For Axian, this would likely be a further step in expanding its geographic footprint in Africa, where it is clearly seen as an attractive long-term opportunity. Possibly, when combined with the execution of Mr Maseko’s plan to extract value through the disposal of some parts of Telkom, it would leave the consortium with a presence in the SA market at an entry price well below what it would cost them to build it from scratch,” it said.
Meanwhile, Deal Leaders International CEO Andrew Bahlmann said a great deal of due diligence was required before a deal could advance, which was what was taking place currently.
“In this instance Telkom knows a fair deal about its former CEO Sipho Maseko, and is in the process of performing financial due diligence on the broader financial backers of the deal.
“The board is required to conduct a thorough due diligence on the proposed buyers’ financial standing and sources of funding,” he said.
Bahlmann said Telkom had requested the consortium to provide further clarity on matters such as the proposed offer price and certainty of funding.
Bahlmann said ultimately, the decision to back a deal involving a former CEO of Telkom and a foreign communications company should be based on a comprehensive analysis of the potential benefits, risks, and alignment with the PIC’s investment objectives.