Telkom share price tanks 25% as MTN bails on takeover talks
MTN has walked away from discussions with Telkom over a potential buyout of the partially state-owned telecoms operator, sending Telkom’s share price plunging on Wednesday morning.
In a notice issued to Telkom shareholders, the operator withdrew a cautionary announcement surrounding the takeover discussions between MTN and Telkom that have taken place over the past three months.
“MTN terminated discussions in relation to the MTN proposal on 18 October 2022, as Telkom was not in a position to provide MTN with assurances around exclusivity,” Telkom said.
“Discussions were at an early stage and had not progressed to due diligence nor had a binding offer been received by the Telkom board of directors.”
The companies first confirmed they were in discussions regarding MTN acquiring Telkom’s entire issued share capital in return for shares or a combination of cash and shares in MTN in mid-July 2022.
MTN’s withdrawal from the talks comes after Rain tabled another offer to Telkom, proposing it should buy Rain in exchange for shares in Telkom.
Rain contends that doing so could create a viable third mobile network operator and 5G “powerhouse” in South Africa.
Uncertainty over MTN-Telkom deal
MTN told shareholders it wrote to the Telkom board containing its comments on Rain’s proposal.
“MTN received a response from Telkom, advising that it will respond to the MTN letter more fully in due course,” MTN said at the time.
“A further announcement will be released by MTN, setting out its position with regards to the future of the transaction.”
On Friday, 14 October 2022, Bloomberg reported negotiations on the price and terms of the deal had stalled, according to people close to the matter.
That news sent Telkom shares plunging from over R49 at market open to under R40.00.
Following Telkom’s announcement of MTN’s bailing on the talks, Telkom’s share price dropped from R44.76 at the start of trading to under R33.60, a decline of 25%.
In response to MTN’s decision, Telkom said its board had a legal and fiduciary duty to consider all bona fide offers.
“Telkom continues to execute its strategy to unlock value for shareholders and will provide an update to the market on progress in due course,” the company said.
The graph below shows how Telkom’s share price dropped following both announcements.
Update — MTN confirms talks have been terminated
MTN has also withdrawn its cautionary announcement to shareholders concerning the potential deal, confirming the talks have been terminated.
“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 agreement to their mutual satisfaction on the process going forward,” MTN said.
“Consequently, caution is no longer required to be exercised by shareholders when dealing in MTN securities.”
Loading ...