TalkTalk has entered takeover talks after Toscafund, the hedge fund that already owns a near-30 per cent stake in the British broadband company, made an approach.
The 97p-a-share approach values TalkTalk at about £1.1bn and has been pitched at a 26 per cent premium to the group’s average share price over the past three months. Including debt, the value of the deal would be about £2bn.
TalkTalk shares surged 16 per cent to 97p after the approach was disclosed on Thursday. The bidder has until November 5 to make a formal offer.
The bid is likely to be dependent on the support of TalkTalk’s executive chairman and founder Charles Dunstone, who also owns an almost 30 per cent of the broadband provider.
Toscafund, which was founded by Martin Hughes and is chaired by Martin Gilbert, made an approach for TalkTalk last year but was rebuffed. Sky News reported that bid was pitched at 135p a share.
Shares in European telecoms companies have since crashed, leaving them more vulnerable to takeovers. Billionaire Patrick Drahi plans to take his European telecoms group Altice private, while smaller players including MasMovil in Spain have been acquired by private equity groups.
TalkTalk’s stock traded at more than 150p when Dido Harding left as chief executive in early 2017 following a damaging data breach in 2015. It was at 120p in February, shortly before the lockdown to stem the spread of Covid-19 was imposed in the UK.
TalkTalk is Britain’s fourth-largest broadband company with more than 4m users and has been seen as a key asset in the potential further consolidation of the UK telecoms market following Virgin Media’s merger with mobile network O2.
Megabuyte, the research company, said the offer values TalkTalk at less than 7 times forecast earnings for 2021. “The big question is whether or not this flushes competing bids from other investors or, more interestingly, a trade buyer such as Vodafone,” it said in a note.
Toscafund has previously invested in UK telecoms via Daisy Group, the acquisitive enterprise telecoms company, which the hedge fund helped to delist in 2015.