A consortium looking to take control of Telkom, led by former CEO Sipho Maseko, has hit back at the fixed-line operator’s management, saying there has been a deliberate attempt to stifle and hold back its bid.
The accusation comes after Telkom formally rejected the consortium’s offer on Friday.
A spokesperson for the consortium told Business Day, “Our view remains that the price that was offered was fair, and that the value creation strategy was sound and would have resulted in Telkom becoming one of the pan-African telecommunications champions, with a sustainable financial framework into the future.”
The consortium said that in the four months since it first wrote to Telkom’s board it had not had the opportunity to advance its case. “We have not had the opportunity to address the board on the merits of our proposed nonbinding offer (except for an informal meeting with the CEO and the chair nearly three months ago). We have therefore been denied the opportunity to explain the rationale for the price and to negotiate price and terms with the Telkom board,” it said.
In June, Telkom confirmed it had received an unsolicited offer led by Maseko, the Public Investment Corporation (PIC) and Mauritius-based telecoms company Axian Telecom to buy a substantial stake in the partly state-owned telecoms firm.
At the end of May, Business Day reported that Maseko had amassed a war chest of about R12bn for a bid to take up equity in the fixed-line operator. Axian is expected to put up $500m of this, and Maseko’s investment firm, Afrifund, the rest.
On Friday, Telkom — currently valued at R14.26bn — rejected the bid, saying its board of directors “having considered the indicative proposal has decided not to continue discussions with the consortium, as the board is of the view that the indicative proposal is not in the best interest of shareholders and that the current Telkom strategy will yield better value for shareholders”.
Even with letters from banks backing the consortium, Telkom management has appeared unconvinced after raising doubts in June about the investment consortium’s ability to execute and fund the proposal that would see Telkom’s fibre, cellphone towers and data centre assets combined with those of Axian to create a pan-African telecom infrastructure group.
Business Day understands that Maseko and his consortium approached Telkom management in an attempt to have a peaceful transaction.
However, the chances of having cordial relations appear to be dwindling, with the consortium saying its attempts to present its case and address concerns so far raised by the company have been thwarted.
“We regretfully conclude that our ambition to conduct a friendly board-supported transaction has been rebuffed,” the spokesperson said.
“One of the reasons advanced by the Telkom board is the lack of clarity regarding the benefits to Telkom arising from our proposal regarding strategy and why and how this strategy is better than Telkom’s current strategy.”
Telkom CEO Serame Taukobong has stood firm in recent months in the company’s stance that it does not need “a knight in shining armour”, in an indication that he did not see the offer as appealing.
“The board is not at a level of comfort in certainty provided by the consortium,” he told Business Day in June.
The consortium said it had not been invited to meet Telkom’s board or to discuss the proposed nonbinding offer with it since the company confirmed receiving an offer in June.
“It is therefore disingenuous, if not misleading, to state as Telkom does in their Sens [announcement] of July 7, that there were ‘discussions’ between the board and us,” the investor group said.
Due diligence
Regarding its ability to fund the bid, the consortium said Telkom has consistently refused to provide access to information that could lead to firm financing after a due diligence process.
“As the Telkom board is aware, in transactions of this nature, it is common practice to require due diligence in order to finalise funding and pricing, and to then articulate the proposed transaction’s value to shareholders,” the consortium said.
“The Telkom board has deprived us of the information and opportunity to answer the very questions it has raised.”
MTN expressed interest in taking over Telkom in July 2022, a move that would have propelled it to the status of SA’s largest mobile operator, ahead of Vodacom.
That deal is estimated to have been worth R30bn, almost twice the current market valuation of the state-controlled company.
Mobile operator Rain tabled a formal, nonbinding proposal to merge with Telkom shortly thereafter, while investment firm Toto Consortium reportedly also made an offer, valued at R7bn, for a stake in Telkom.
But all three offers had been withdrawn by January after unsuccessful talks.
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