TalkTalk mulling take-private offer from Toscafund

[LONDON] TalkTalk Telecom said it received a preliminary non-binding offer from Toscafund Asset Management of 97 pence per share to take it private, valuing the company at about US$1.4 billion.

TalkTalk's board has agreed to consider the proposal, the company said in a statement Thursday. Toscafund is required to make a formal offer or drop the approach by Nov 5, according to UK takeover rules.

Shares of TalkTalk, an internet service provider, jumped almost 18 per cent to 97.5 pence on the news, slightly exceeding the offer price, marking their biggest intraday gain for eight years. The stock traded at 97.05 pence at 11.02 am in London.

Spokespeople for TalkTalk and Toscafund declined to comment.

Toscafund is the company's second-largest shareholder after Charles Dunstone, TalkTalk co-founder and chairman. The London-based investment fund already owns 29 per cent of the company, slightly less than Dunstone's 29.9 per cent, according to data compiled by Bloomberg. A further 11 per cent is owned by co-founder David Ross. TalkTalk rejected a 135 pence-per-share approach from Toscafund last year.

Fierce competition, a data breach and profit warnings have shaved about three-quarters off the value of TalkTalk shares since the first half of 2015. However, its focus on offering low-cost connections may help it weather economic pressure from measures to contain the pandemic.

"They are getting a business that's got a decent niche at the low end of the market, but it has struggled in the last four or five years to grow its subscribers," James Ratzer, an analyst at New Street Research, said in a telephone interview. "If we go into some macroeconomic downturn post-Covid, and customers start to become more price sensitive, TalkTalk could be a beneficiary of this." Salford, England based-TalkTalk has 4.2 million customers, according to its latest annual report. It uses the infrastructure of other networks, mainly BT Group, to sell consumer and business broadband.

BLOOMBERG