MTN, Africa’s largest mobile operator on Wednesday called off takeover talks South Africa’s third-largest mobile operator Telkom due to lack of exclusivity.
MTN had announced the discussions about a potential acquisition in July, while Telkom had also received a proposal from data-focused mobile operator Rain.
“Discussions were at an early stage and had not progressed due to due diligence nor had a binding offer been received by the Telkom board of directors,” Telkom said in a statement on Wednesday.
“The Telkom board has a legal and fiduciary duty to consider all bona fide offers”.
Telkom’s share had crashed 15.5% to R37.82 in early trade, giving back about half of the gains made since the talks with MTN were first announced.
Rain’s public expression of interest in a merger in August had resulted in a public reprimand from SA’s takeover regulator, given that it hadn’t given any approvals. It also came shortly after MTN said it was considering buying Telkom in return for shares or a combination of cash and shares. Rain then made a formal proposal on 14 September.
Bloomberg has also reported that the SA government has received an unsolicited R7 billion bid for its 40.5% stake in Telkom from investment firm Toto Consortium, part of a consortium that controls a 24% stake in Richards Bay Minerals, majority owned by mining giant Rio Tinto.
Telkom had net debt of R7.5 billion at the end of March, and its board is currently considering ways to unlock value for shareholders, believing that the price at which its shares trade do not reflect the underlying value of the business.
One of Rain’s major shareholders, African Rainbow Capital, values it at about R18 billion, while Telkom was valued at a R22.88 billion on Tuesday’s close, and MTN was worth R242.8 billion.
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Rain maintains a merger with Telkom could create a “5G powerhouse” and also mooted other benefits, including in terms of infrastructure, while also avoiding the creation of a mobile “duopoly” in the form of Vodacom and MTN.
Source: News 24
