Shares in Charles Dunstone’s TalkTalk surged by 16% after the telecoms company agreed to discuss a £1.1bn takeover bid.
The bid has come from Toscafund, the telecoms company’s second-largest shareholder. The TalkTalk board have agreed to negotiations but the hedge fund would have to get the backing of the executive chairman and founder, Dunstone.
Dunstone is TalkTalk’s largest shareholder with almost a 30% stake. Toscafund, which is chaired by Martin Gilbert, has a similar sized stake.
“The board has considered the terms of the proposal and has agreed to progress the proposal further with Toscafund along with taking advice from the company’s advisers,” TalkTalk said in a statement.
Toscafund’s 97p-a-share offer values TalkTalk at £1.2bn. Including debt, the deal would be worth about £2bn. Last year, Toscafund reportedly made an offer valuing the business at 135p-a-share, which was rebuffed by management.
TalkTalk was trading at 120p in February, shortly before the UK went into a nationwide lockdown because of the coronavirus pandemic.
“It looks like TalkTalk’s ultimately unhappy stay on the markets could be coming to an end,” said Russ Mould, investment director at AJ Bell. “TalkTalk was always positioned as the cheaper alternative to the likes of BT, Sky and Vrgin Media for broadband and other services but ultimately it struggled to gain traction in a highly competitive marketplace and growth has really stalled in recent years.”
The 97p-a-share offer is less than a third of TalkTalk’s share price around five years ago.
As the share prices of telecoms companies have fallen, takeovers have become more likely.
In May, the parent companies of the TV and cable company Virgin Media and the mobile operator O2 agreed a £31bn merger in an attempt to create a new “national champion” to challenge BT and Sky in the UK.
TalkTalk is Britain’s fourth-largest broadband company with more than 4 million customers. The company’s shares traded at more than 150p at the time of the departure of the former chief executive Dido Harding in 2017, two years after the business was rocked by a large-scale breach of customer data. Harding is now heading the NHS Test and Trace programme.
“Problems of the company’s own making haven’t helped, including the high-profile cyber-attack which was highly damaging to the brand,” said Mould.