Telkom closes 26,08% higher as MTN opens buyout talks

MTN has entered discussions to acquire the entire issued share capital of Telkom, the two companies said in separate announcements to the JSE on Friday. Telkom’s share price closed 26,08% higher at R42,25, and MTN closed 5,19% up at R141,87.

JSE SENS announcements (via Moneyweb) carried both statements, which set out the proposed structure and the caution that applies to shareholders while talks continue.

What the two companies put on the record

Under the proposal, MTN would acquire all of Telkom’s issued share capital in return for shares, or a combination of cash and shares, in MTN.

“Shareholders are advised that MTN and Telkom SA SOC Limited have entered into discussions in relation to MTN acquiring the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN,” MTN said in its announcement.

The company added that discussions are at an early stage and that there is no certainty the transaction will be consummated. Telkom issued its own SENS announcement on the offer.

No financial detail of the proposed offer has been disclosed. MTN said the transaction, if concluded, may have a material effect on the price of the company’s securities, and advised shareholders to exercise caution when dealing in the company’s securities until a further announcement is made.

Telkom closed the session at R42,25, a gain of 26,08%. MTN closed at R141,87, up 5,19%.

A board change on the same day

In a separate SENS announcement, Telkom said Mteto Nyati has been appointed to its board. Nyati is a former chief executive of MTN and a former chief executive of JSE-listed technology group Altron. The appointment forms part of a set of changes to the Telkom board.

The third approach, and what it turns on

This is not the first time MTN has looked at buying Telkom. The outcome of this round will be decided by the terms of any offer, the competition authorities and Telkom’s shareholder register, and none of those has yet been tested.

What the announcements establish is narrow and clear. Two listed South African telecommunications operators are in talks about a deal that, if it proceeds, would combine the country’s largest mobile network by subscriber base with the operator that holds a large share of the country’s fixed-line and wholesale broadband infrastructure.

For Telkom shareholders, the immediate effect is the cautionary. The company has told them that a concluded transaction could move the price of its securities materially, and that they should be careful until a further announcement is made. For MTN shareholders, the disclosure is that the company is at an early stage of a transaction it has not priced in public.

For the market, the effect is already visible in the closing prices of both counters.

What happens next

The next dated step is a further announcement from the companies. Until it comes, the cautionary stands, no offer terms are on the record, and the discussions remain at the early stage both companies have described.

Source: JSE SENS announcements, via Moneyweb. https://www.moneyweb.co.za/news/south-africa/telkom-shares-soar-30-as-mtn-wants-to-buy-it