TalkTalk’s board of directors today announced their recommendation to accept the cash offer of 97 pence per share from Toscafund Asset Management, a hedge fund, and Penta Capital, a private equity firm. Toscafund and Penta’s offer values TalkTalk’s equity at £1.1bn ($1.5bn). TalkTalk is a UK broadband provider to consumer and business customers, with more than 4 million subscribers across the country.
As an alternative to the cash offer, TalkTalk shareholders can elect to receive shares in the newly formed private company by Toscafund and Penta, which will be unlisted. However, the board of directors of TalkTalk are only recommending the cash offer of 97 pence per share.
Toscafund and Penta’s offer needs approval from 75% of shareholders, excluding Toscafund. Additionally, any over-bidder must offer at least 115 pence per share (i.e., 18.5% higher than the current offer) to beat out Toscafund and Penta’s offer.
Assuming a sufficient number of shareholders accept Toscafund and Penta’s offer, the transaction will close in Q1 2021. Indeed, closing will occur shortly after a Court Hearing on February 3, 2021.
Ownership of TalkTalk
Currently, Toscafund owns a 29.5% holding in TalkTalk. Additionally, TalkTalk Chairman, Charles Dunstone, owns a further 30% of the company. Finally, TalkTalk co-founder David Ross holds a further 11% ownership stake.
Notably, TalkTalk Chairman, Charles Dunstone has accepted Toscafund and Penta’s offer.
Prior Take-Private Attempt by Toscafund
In mid-2019, Toscafund made an informal approach to TalkTalk, at a valuation of 135 pence per share. At the time, this offer was rejected by the company. Indeed, Toscafund’s current offer of 97 pence per share is 28% below its prior offer for TalkTalk only 18-months ago.
TalkTalk’s Future Under Toscafund
Under the ownership of Toscafund and Penta, TalkTalk will seek to reverse the decline in its market share of UK consumer broadband. TalkTalk currently has an 11% consumer broadband market share. Indeed, TalkTalk’s current market share is nearly half the share it had only 10 years ago.