Shares in Business Connexion (BCX) advanced 7.4% in afternoon trade on the JSE on Thursday (22 May), after Telkom said it has entered into an agreement to acquire the group for R2.7 billion.<\/p>\n
By 16:15pm, the listed ICT group traded at R6.40 on the local bourse, giving the group a market cap of R2.6 billion, and below Telkom’s offering price of R6.60.<\/p>\n
BCX’s shares are up 36% over the past year.<\/p>\n
Telkom’s purchase offer would include the entire issued ordinary share capital of BCX, but excludes the BCX ordinary shares held by Business Connexion as treasury shares.<\/p>\n
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\u2019s cautionary announcement on 15 April 2014.<\/p>\n
Shares in Telkom declined 77 cents, or 2%, to R37.40 in afternoon trade, valuing the company at R19.5 billion.<\/p>\n
Telkom’s shares are up as much as 185% over the past year, despite continual financial headwinds.<\/p>\n
Reuters suggested investors were sceptical about the bid’s chances of success.<\/p>\n
In 2006, Telkom approached the ICT group to acquire the entire issued share capital of BCX at R9.00 per share.<\/p>\n
However,\u00a0Greg Cort, an analyst at asset manager Electus, told Reuters that the competitive landscape had changed significantly since 2007, meaning that the deal was unlikely to be rejected for a second time.<\/p>\n
“It would … further entrench their (Telkom’s) position in the convergence space,” Cort said.<\/p>\n
“Many of the things we were hoping to come through in BCX, like getting the data centres utilisation up, haven’t materialised. There has been excess capacity in the South African market, so if this is absorbed down the line it would result in extra value to Telkom shareholders. As things stand, it is a reasonable price,” the analyst said.<\/p>\n
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.<\/p>\n