After months of trying to convince the Telkom board to accept a bid for a 51% controlling stake, the company's former group CEO Sipho Maseko has ruled out a hostile takeover of the telecommunications company.
Maseko told Business Times he will not revise his bid, and is now looking for opportunities elsewhere as he embarks on an aggressive investment drive to build one of the biggest investment funds on the continent.
Telkom rejected the bid for a controlling stake from the consortium led by Maseko’s Afrifund Investments and Mauritius-based Axian Telecom. The Public Investment Corporation, which has a 14% stake in Telkom, was in their corner. But Telkom said the offer of R46 a share was not in the best interests of shareholders as it believed its turnaround strategy would yield better value.
This was a major blow to Maseko and his partners, who had plans to combine Telkom’s assets with Axian’s to create a pan-African telecom company with infrastructure assets spanning a number of countries.
“We are definitely walking away. The board has made it clear that they are not willing to engage with us at all,” Maseko said in an interview.
He said the consortium had not been given an opportunity to present its proposal to the board, which would have helped it to understand the strategy and execution.
Had they been given a hearing by the board, the consortium might have reconsidered its bid for a controlling stake as “we would be in alignment with strategy and plans for the company”.
Afrifund and Axian had already raised R12bn and held meetings with most institutional shareholders, as well as with the minister of communications & digital technologies, Mondli Gungubele, to present their case. The government is a majority shareholder in Telkom with a 40.9% stake.
Maseko said the investors had wanted to know more about the consortium, its strategy and funding, and the rationale for the price.
“We were not in negotiations [for a deal]. But it’s a kind of discussion we wish we actually had with the board. The shareholders took their time to understand the logic of the price and our investment plans … and how we intend to meet those to grow the infrastructure. They had the opportunity to test the strength of the funding and of the partnerships we are bringing into the equation.
“I have not received any indication that there is a problem with the strategy and how it should be executed.”
Ultimately, if shareholders think this is a good idea, we are still here. If they want us to come back, they will call us
— Sipho Maseko
Maseko and his partners had wanted all shareholders — including the government — to sell about 35% of their shares, which collectively would have given them a controlling stake of 51% while the existing shareholders remained invested in Telkom with diluted holdings.
But Business Times understands there is reluctance from within the ANC for the government to dilute or entirely dispose of its stake in Telkom.
Asked if the consortium would consider a hostile takeover, Maseko said this was not an option. “For the things we want to do [at Telkom] it is always best to come through the front door, hence a hostile takeover is not an option. You have to be welcomed by shareholders and the staff.
“If none of those people are welcoming you there is no reason to force your way in. Ultimately, if shareholders think this is a good idea, we are still here. If they want us to come back, they will call us. But if there are other plans that will create value for shareholders, it’s also fine with us.”
As Telkom prepares for its AGM next month, Maseko said it should be a forum where shareholders express their views about plans for the company. He believes the proposed takeover bid should be discussed so that shareholders can have their say.
Telkom CEO Serame Taukobong said last month his company would not entertain any offers below R60 a share. He said they would continue pursuing a strategy of unlocking value for shareholders by, among other things, selling minority shares in some subsidiaries.
Telkom said on Friday it was evaluating two bids for its masts and towers business, Swiftnet, and would announce the results in due course.
“Telkom is pursuing its strategy to unlock value for shareholders. While it does so, the Telkom board has a fiduciary duty to consider all bona fide offers. Currently, there is no bona fide offer under consideration for Telkom, Openserve or BCX,” it said.
Maseko said Afrifund Investments was now pursuing transactions in logistics, energy, agriculture and food processing, as well as telecom infrastructure in South Africa and on the continent.
“We have a very strong pipeline. What we don’t have a shortage of is transactions. Even on the Telkom transaction, there have been people who have come to us to see how they can work with us and offer funding.”
He has ambitious plans to grow Afrifund into one of the largest pan-African investment houses by 2030.
“We want to partner with people who also want to see a sort of social impact [from] things we are interested in.”
Afrifund is in discussions with two companies that run beef and sheep feedlots, abattoirs and meat packaging over potential deals. The companies export to selected countries but want to expand to new markets.
“We are constantly assessing investment opportunities and are looking for partners with the same long-term outlook as we have.”
The investment company has done roadshows in Asia and will be doing the same in Europe in the coming months to look for investment partners.
Asked if Afrifund would pursue more opportunities with Axian, Maseko said: “We have built a relationship and I will certainly not hesitate to look at other opportunities with them. I like the way they do things. They are very entrepreneurial, they are not just about deals, they are hands-on and get involved and do things themselves. It’s impressive how they do things.”
He was recently appointed to the board of Shoprite and sits on the boards of some unlisted companies including airline Airlink.
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