BUSINESS Connexion Group’s ( BCX) share price faltered and plunged as much as 53 percent after the market panicked in reaction to an announcement that an aspect of the acquisition application had been withdrawn.
The share price only started clawing back after both Telkom and BCX issued a press statement confirming that the planned acquisition of BCX by Telkom was “100 percent on track”. After falling sharply to R3, BCX’s shares recovered to close at 2.05 percent lower at R6.20, while Telkom gained 0.84 percent R70.44.
Both companies are awaiting a Competition Commission decision on the planned R2.7 billion acquisition of BCX by Telkom that is aimed at boosting cloud-based offerings of information technology services.
The two parties wrote to the Independent Communications Authority of SA (Icasa) to withdraw an August 29 application for a change of control of the licence.
The announcement yesterday morning, at first ambiguous, was misread by the market which might have interpreted it to mean the deal between the two companies was being called off.
“If that was the way it sounded at first, I too am not too surprised that the market reacted negatively because the market sees the deal as being good for both Telkom and BCX,” said Africa Analysis analyst Dobek Pater.
A press release from Telkom’s media relations senior specialist Pynee Cheety clarified that both Telkom and BCX “remain entirely committed to the transaction with BCX and the transaction will proceed, pending final approval by the Competition Tribunal”.
It said that Telkom and BCX remained in ongoing discussions with Icasa, as the regulator of this industry.
Chetty said the parties had applied to Icasa in August for written approval for a change in control of the shareholding of BCX from current shareholders of BCX, to Telkom.
Chetty clarified that subsequent to this application, BCX and Telkom have reviewed the Electronic Communication Act, with particular focus on sections 13(1) and 31(2A).
“On reviewing these elements, the view has been taken that the application for the transfers of licences from BCX to Telkom will not be required.
“The application for the licence transfer was therefore withdrawn from Icasa. However, the transaction between Telkom and BCX remains on course for completion, pending final approval from the competition authorities,” Chetty said.
The proposed transaction between BCX’s current shareholders and Telkom will result in Telkom acquiring the entire issued share capital of BCX in terms of an Implementation Agreement entered into between the parties on May 21 last year.
Telkom is offering slightly over R6 a share for Business Connexion, an 18 percent premium over the 30-day volume-weighted average price.
The offer values BCX at about R2.7bn, based on 405 million shares outstanding.
Telkom, 40 percent-owned by the government, is struggling to revive revenue growth as consumers migrate from fixed-line technology to data-enabled smartphones and tablets.
The Pretoria-based company needed to cut its staff of about 19 200 employees by almost a third over five years to remain financially viable, chief executive Sipho Maseko said in December. – Additional reporting by Bloomberg.