Telkom says it has entered into an agreement to acquire listed ICT group, Business Connexion (BCX) in a R2.7 billion cash offer funded from its own cash resources.
The purchase would include the entire issued ordinary share capital of BCX, but excludes the BCX ordinary shares held by Business Connexion as treasury shares.
Telkom will pay to the ordinary shareholders a cash consideration of R6.60 per ordinary scheme share.
The offer represents a premium of 22% to the volume weighted average share price of R5.38 for the 60 trading days prior to BCX’s cautionary announcement on 15 April 2014.
Shares in BCX lifted 6.54% to R6.35, shortly before 10:00am on the JSE, giving the group a market cap of R2.4 billion.
In 2006 Telkom approached the ICT group to acquire the entire issued share capital of BCX at R9.00 per share.
Telkom said it would terminate the listing of the BCX ordinary shares on the main board of the JSE should the proposed transaction be implemented.
BCX is a South African cloud based services provider with offices in Africa, the UK and Dubai. The Company employs more than 6,700 people on the African continent and generates revenue in excess of R6 billion per annum.
By way of rationale for the acquisition, Telkom said it has embarked on a strategy to improve performance and one of the key considerations in respect of this strategy is to grow beyond its core business of connectivity by expanding into ICT services.
Telkom said that the proposed transaction will enable it to expand its existing offerings whilst, at the same time, providing scale in IT services, which will help reinforce it’s core connectivity business and enhance it’s convergence strategy.
Telkom intends to strengthen and seek growth opportunities for its South African operations and to support expansion of BCX’s current footprint on the African continent.
Commenting on the offer, Telkom Group CEO, Sipho Maseko, said: “A key consideration of our strategy is to grow beyond our core business of connectivity and expand into end-to-end ICT services. This will form part of the strategy to improve performance and restore profitability.”
According to BCX CEO, Benjamin Mophatlane, this would be a significant step forward for Business Connexion as part of the company’s own convergence strategy. “It will increase our ability to meet our customers’ needs through integrated end-to-end solutions.”
In November, Business Connexion, reported a 17.3% rise in operating profit for the year ended August 2013, to R322.6 million.
Revenue increased by 5.9% to R6.17 billion,with a normalised diluted headline earnings per share of 52.6 cents.