TalkTalk agrees to £1.112bn offer from Toscafund

Telecoms group TalkTalk has agreed takeover terms with Toscafund Asset Management as part of a £1.112bn deal that will take the Salford-based business private.

It also announced half year results this morning that showed a slight fall in revenues and a small loss.

TalkTalk, which moved its HQ from London to Salford in 2018 providing a 500-jobs boost for the region, confirmed on October 8, that it had recently received a preliminary and non-binding proposal from Toscafund Asset Management (TAM) on behalf of funds advised by it, regarding a possible cash offer to be made by a newly-formed company at a price of 97p per share, together with a full unlisted share alternative.

TalkTalk said its board had considered the terms of the proposal and had agreed to progress it further, along with taking advice from the company’s advisers.

Following the announcement shares jumped by more than 16% in TalkTalk. By 8.30am stock in the business had soared to 97p, valuing the group at £1.11bn.

The deadline for talks between the two parties has been extended twice, for negotiations to continue. The latest deadline was December 17.

Today, the group confirmed agreement on the bid, with Ian West, senior non-executive director, saying on behalf of the independent TalkTalk directors: “Having considered in detail the best interests of all shareholders and TalkTalk as a whole, the independent TalkTalk directors believe that the cash offer from Toscafund provides an opportunity for shareholders to recognise immediate value for their shares at a premium of approximately 26% to volume-weighted average price for the three month period ended 7 October 2020.

“The independent TalkTalk directors have also taken into account the risks associated in achieving TalkTalk’s strategic ambitions and the wide support that Toscafund would provide in this regard.

“The independent TalkTalk directors believe, taking into account the advice they have received, that the terms of the cash offer are fair and reasonable and are unanimously recommending that shareholders accept the cash offer.”

Sir Charles Dunstone, TalkTalk’s founder and chairman, said: “I am pleased to have the opportunity to continue to be a major shareholder in TalkTalk.

“My decision underlines my passion for the company and the confidence the senior management team and I have about our journey ahead. That said, as the UK transitions to full fibre we have a hugely challenging, but exciting opportunity.

“Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fibre for businesses and consumers nationwide. The Telecoms industry is going through a fundamental re-set and we are keen to play our part in it.”

The group also published its results for the six months to September 30, that showed revenues of £740m, down from £792m at the same point last year, and a pre-tax loss of £3m, against a pre-tax profit of £1m the previous year.

TalkTalk said it had produced a robust operational performance, despite the ongoing impact of COVID-19.

Data usage has soared by more than 40% since the start of the pandemic and the importance of fast, reliable and affordable connectivity has never been clearer, it said.

Chief executive Tristia Harrison said: “Our financials have been resilient in the first half, albeit with some impact of COVID-19 on headline revenue and EBITDA.

“Lockdown has taught us that fast, reliable and affordable connectivity is more important than ever, and we have seen excellent network performance despite a 40%+ increase in data usage.

“We have added 187,000 FTTC (fibre to the cabinet) customers during the first half, with 120,000 in Q2, representing over a third of all new Openreach FTTC connections; and over 80% of new retail customers are choosing Fibre products.

“Customers will benefit from even greater speeds as we transition to the next generation after FTTC-Full Fibre.”

She added: “Our B2B (business to business) Wholesale and Ethernet business has seen a very robust performance. We’re adding Ethernet connections significantly above our market share, with a growing proportion of higher speed circuits.

“B2B is a crucial area of our business going forwards and I’m delighted at the sustained progress we’re making.”

In a separate announcement today, Kate Ferry, TalkTalk chief financial officer, has decided to step down from the board after three-and-a-half years with the company.

Phil Eayres will become chief financial officer, having worked with the business for more than six years, initially as operations director in consumer and more recently as an independent strategic advisor leading the development and disposal of FibreNation, as well as the strategic planning for the group, while also playing a key role in working on the proposed acquisition.

Prior to this he spent eight years in various roles for supermarket group Pick n Pay in South Africa, having begun his career in finance at Shell, Pepsico and Diageo before joining Bain & Company in 1999.

As part of his new role, Phil will continue to lead strategy and transformation across the group.