Telkom’s shares, once again rode the rollercoaster of speculation, yesterday rising 10% after Bloomberg News broke a story at the weekend saying the former CEO Sipho Maseko, was spearheading a bid to buy 35% of the partially state-owned telecommunications group.
Bloomberg News reported that the Public Investment Corporation (PIC), Africa's largest asset manager, was backing a possible bid by Maseko’s investment vehicle, Afrifund, and Mauritius-based Axian Telecom for the potential offer for a 35% stake.
The government owns a 42% stake.
The shares rose to an intraday high of R27.88 on the speculation. This after the troubled counter’s shares have sagged 43.75% in a year as the partially owned state-entity struggles to compete with its main rivals, MTN and Vodacom.
This is not Telkom’s first deal rodeo that has excited shareholders, who have been losing money over fist in this counter. Last year October, telecos giant MTN pulled the plug on Telkom acquisition talks. And in January, Telkom informed shareholders that it had terminated discussions relating to Rain's proposal about a potential acquisition.
The market earlier this month gave Telkom the cold shoulder, sending its shares diving 30% as it shocked the market with a trading update saying it planned to impair its assets by R13 billion in order to migrate legacy units to new generation technologies, while it expected its annual earnings to decline by up to 105%.
Telkom at the time said significant market changes and current economic conditions, including accelerated load shedding, low anticipated economic growth rates and a high-interest rate environment, coupled with evolving technological advancements had had an adverse effect on it.
The entity also announced a restructuring process aimed at meeting future demands in February. Up to 15% of employees in the group had been impacted by the process.
Telkom is set to publish its annual results for the year ended March 31, 2023, on or about June 13, 2023.
Attempts to get comment from Telkom and the PIC were unsuccessful by the time of going to print.
Commenting on the possible deal, Andrew Bahlmann, the chief executive: Corporate & Advisory, Deal Leaders International, said there was a need for Telkom to distance itself from the largely discredited state-owned enterprise sector as a matter of urgency, so on the surface any deal would seem to be an improvement.
“Also in its favour is that Telkom has been a target in a number of recent discussions, and from a national and competitive perspective it might be better for it not to join one of the major mobile companies,” he said.
Bahlmann said, however, irrespective of the circumstances of any transaction, the basics of mergers and acquisitions still applied in respect of professionally evaluating each deal.
This included evaluating the former CEO's track record and experience in leading Telkom, an analysis of the strategic rationale behind the proposed acquisition and how the new owners backed by the PIC planned to leverage Telkom's assets, capabilities, market position, potential synergies, competitive advantages, and growth opportunities that could arise from their involvement.
It would also need to conduct a thorough due diligence on the proposed buyers, evaluate their financial standing, operational capabilities, and any potential legal or regulatory issues.
There would also have to be an evaluation of the financial aspects of the deal, including the valuation of Telkom, the terms of the acquisition, and the financial resources of the buyers, he said.
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