TalkTalk Telecom (LON: TALK) to be bought out in a 1.11-billion deal

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TalkTalk Telecom (LON: TALK) to be bought out in a 1.11-billion deal

 TalkTalk Telecom (LON: TALK) to be bought out in a 1.11-billion deal

Summary

  • TalkTalk Telecom Group PLC (LON: TALK) said that it has agreed to be taken over by Tosca IOM.
  • The company announced its half yearly results, witnessing a decline in its headline revenue and EBITDA
  • The FTSE 250 company informed that Kate Ferry has stepped down from the position of Chief Financial Officer

 

TalkTalk Telecom Group PLC (LON: TALK) said that it has agreed to a deal where it will be taken over by Investment fund Tosca IOM. The LSE-listed telecommunication firm has been valued at £1.11 billion ($1.4 billion) for the deal. The management of the company considered the terms of the proposal and agreed on the same.

The UK’s fourth largest internet service provider had received a preliminary non-binding offer of 97 pence per share from Toscafund Asset Management LLP on 8 October, proposing to take the company into private ownership. Under the deal, the shareholders will receive 97 pence in cash per TalkTalk share, a 16 per cent premium to the closing price of the stock on 7 October (83.3 pence).

 

(Image source: ©Kalkine Group 2020)

Commenting on the acquisition, TalkTalk Chairman Sir Charles Dunstone said that being a private company, it would allow it to accelerate adoption and focus on the role of the affordable fibre provider for businesses and consumers across the nation. The company is looking forward to playing its part in resetting the telecom industry in the country.

Toscafund Asset Management is a hedge fund based out of London. It is the TalkTalk’s second-biggest shareholder and owns a 29 per cent stake. Dunston owns 29.9 per cent shares and is the single biggest shareholder.

In 2019, Toscafund had approached TalkTalk with a 135 pence per share offer, but it was rejected then.

Other developments

Announcement of half yearly results

Despite the pandemic impacting the headline revenue and EBITDA, the company managed to be well positioned with resilient financial performance. The company witnessed an excellent network performance with an increase in data usage by more than 40 per cent.

There has been a change in the work culture and consumer behaviour due to the pandemic with a large number of people using digital medium for education, entertainment and work commitments. The online platforms for office meetings, school and college classes have become a necessity, which has resulted in a robust operational performance.

 

Operational Highlights

  • TalkTalk saw 187k Fibre net adds (H1 FY20: 292k), recording an improvement of 120k in Q2 (Q1 FY21: 67k).
  • Ethernet net adds recorded 2.1k (H1 FY20: 2.1k) with 1.7k in Q2, representing 24 per cent of all new openreach ethernet connections.
  • The company successfully launched fibre to the premise (FTTP) services on CityFibre and openreach networks providing access to approximately 3 million marketable homes and businesses. It is estimated to reach 4 million customers by the end of the FY21.

Financial Highlights

  • Headline revenue (excluding Carrier and Off-net) was down by 6.2 per cent YoY and was at £717 million (H1 FY20: £764 million).
  • Statutory revenue was £740 million (H1 FY20: £792 million), decreasing by 6.6 per cent due to decline in carrier revenue and lower non-headline MVNO revenue.
  • Headline EBITDA witnessed a decline of 12.9 per cent to £122 million (H1 FY20: £140 million) driven by lower revenue.
  • Statutory operating profit was at £20 million (H1 FY20: £29 million). There was a reduction due to the contraction in Headline EBITDA.
  • Net debt increased to £967 million (FY20: £954 million) with improved free cash flow generation year-on-year. 

Change of Director

The FTSE 250 company also announced that Kate Ferry will be stepping down from the position of the Chief Financial Officer after serving for more than three years.

She will be replaced by Phil Eayres, who has been working for the company as Operations Director in Consumer for the last six years and also is an independent strategic advisor in the company.

TalkTalk stocks (LON: TALK) were trading at GBX 99.15 on 17 December at 11:55 AM, up by 3.01 per cent from the previous day’s close.

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