Telkom agrees KT Corp deal at cut price

Telkom said on Tuesday (8, May 2012) that it has reached an in principle agreement regarding the terms of a potential strategic venture with Korea Telecom (KT) Corporation, which includes a revised cash issue price due to a decline in the group’s share price.

KT is acquiring a strategic equity shareholding of 20% in the post-issue ordinary share capital of Telkom by way of a specific issue of shares for cash.

Telkom said that the deal would include a revised cash issue price for the new Telkom ordinary shares to be issued to KT.

“Since the first cautionary announcement on 14 October 2011, there have been a number of developments concerning Telkom that have materially impacted the Telkom share price. As a consequence, Telkom and KT have agreed to revisit the terms of the Potential Equity Investment,” Telkom said in a statement on Tuesday.

“Shareholders are advised that Telkom and KT have agreed to a revised cash issue price for the new Telkom ordinary shares to be issued to KT under the Potential Equity Investment of ZAR25.60 per new Telkom ordinary share,” it said.

The proposed issue price represents a 9.9% premium to the closing price of Telkom ordinary shares of ZAR23.30 on the securities exchange operated by JSE Limited on 4 May 2012 and a 7.1% premium to the volume weighted average price of Telkom ordinary shares for the 30 trading days up to and including 4 May 2012.

Telkom further noted that, in the event that it declares and/or pays any distribution to Telkom shareholders prior to the implementation of the venture, the aggregate subscription price payable by KT will be reduced by 20% of the total gross distribution declared and/or paid by Telkom.

The SA firm said in October that, should the two companies reach an agreement, KT would buy Telkom ordinary shares, by way of a specific issue of Telkom shares, at a price of R36.06 per share – which if implemented, would result in KT having a 20% interest in the post-issue ordinary share capital of Telkom, worth about US$600 million (R4.7bn).

If implemented, the strategic venture would see the companies entering into a 5-year co-source management services agreement to formalise the relationship and identified areas of mutual strategic and business cooperation.

The proposed strategic venture remains subject to the fulfilment of a number of pre-conditions before the final terms can be finalised, Telkom said.

KT Corp is a market leader in the Republic of Korea’s fixed and broadband segment with an 86% and 45% market share respectively, and number two in the mobile business (32% market share, with approximately 16.8m subscribers).

In early trade on the JSE, shares in Telkom were relatively static, up six cents to R23.37 having traded at R34.50 when the deal was originally announced in October last year.

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Telkom agrees KT Corp deal at cut price