TalkTalk agrees to discuss £1.1bn takeover bid

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 executive chairman and founder, Dunstone.

Dunstone is TalkTalk’s largest shareholder with an almost 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,” the company 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 due to 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 peak level around five years ago.

As the share prices of telecoms companies have fallen takeovers have become more likely.

In May, the parent companies of TV and cable company Virgin Media and mobile operator O2 agreed a £31bn merger in a bid 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 4m customers. The company’s shares traded at more than 150p at the time of the departure of former chief executive Dido Harding in 2017, two years after the business was rocked by 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 cyberattack which was highly damaging to the brand,” said Mould.

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