MTN calls off takeover talks with Telkom citing lack of exclusivity

South African mobile telecommunications operator, MTN, said on Wednesday it is no longer going ahead with the Telkom takeover talks.

Telkom is the country’s third-largest mobile operator and also confirmed that MTN has called off takeover talks due to a lack of exclusivity.

MTN previously announced the discussions about a potential acquisition in July, while Telkom had also received a proposal from data-focused mobile operator Rain.

“Discussions were at an early stage and had not progressed due to due diligence nor had a binding offer been received by the Telkom board of directors,” Telkom said in a statement on Wednesday per News24.

“The Telkom board has a legal and fiduciary duty to consider all bona fide offers”.

In a statement to the media, MTN, confirmed the termination of the talks, saying after “extensive engagements and deliberations between the parties, shareholders are advised that the discussions regarding the proposed transaction have terminated, as the parties were unable to reach an agreement to their mutual satisfaction on the process going forward.”

Following the announcement, Telkom’s share crashed 15.5% to R37.82 in early trade, giving back about half of the gains made since the talks with MTN were first announced.

Meanwhile, Rain’s public expression of interest in a merger back in August resulted in a public reprimand from the country’s takeover regulator, given that it hadn’t given any approvals. 

It also came shortly after MTN said it was considering buying Telkom in return for shares or a combination of cash and shares. Rain then made a formal proposal on 14 September.

Bloomberg reported that the South African government has received an unsolicited R7 billion bid for its 40.5% stake in Telkom from investment firm Toto Consortium, part of a consortium that controls a 24% stake in Richards Bay Minerals, majority owned by mining giant Rio Tinto.

“Telkom had net debt of R7.5 billion at the end of March, and its board is currently considering ways to unlock value for shareholders, believing that the price at which its shares trade does not reflect the underlying value of the business,” reports News24.

“One of Rain’s major shareholders, African Rainbow Capital, values it at about R18 billion, while Telkom was valued at a R22.88 billion on Tuesday’s close, and MTN was worth R242.8 billion.”

The Cape Town-based publication published that Rain maintains a merger with Telkom could create a 5G powerhouse and also mooted other benefits, including in terms of infrastructure.

Main Image: MTN/BusinessLIVE