Rain is rejected by Telkom

Telkom has told shareholders that it has ended negotiations about Rain’s proposed purchase.

On September 30, 2022, Rain presented a formal proposal to Telkom, requesting that Telkom purchase it with freshly issued shares.

“After initial discussions, but prior to any due diligence, the parties have decided that a suitable transaction is not possible at this time,” Telkom said in a notice on the JSE news service.

“Telkom continues to execute its strategy to unlock value for shareholders and will provide an update on progress in this regard in due course.”

The news follows a difficult sequence of talks including Telkom, Rain, and MTN.

MTN and Telkom publicly stated that they were in talks on MTN purchasing Telkom’s full issued share capital in mid-July 2022 in exchange for shares or a combination of cash and MTN shares.

Rain disclosed to the media in August that it has submitted its own proposition to Telkom.

However, Telkom denied receiving the bid, and the Takeover Regulation Panel chastised Rain for making public remarks without authorisation.

Rain eventually reversed its Telkom merger bid statement and, a month later, presented a legally approved official proposal.

However, as a result of Telkom’s conversations with Rain, MTN walked away from the bargaining table, leading Telkom’s share price to tumble by 25%.

According to a person familiar with the conversations, MTN chose to halt talks because it did not want the negotiations to proceed concurrently.

This was due to MTN’s previous experience with similar problems, which shown that it slows down discussions, potentially extending a three-month process into a year or more.

MTN chose to end their conversations when Telkom failed to provide a definite answer on how long it would take to assess Rain’s offer.

MTN may rethink resuming discussions with Telkom now that Rain’s plan has been resolved.