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TalkTalk agrees £1.1bn takeover after COVID-19 hits profits despite higher web use

Tom Belger
·Finance and policy reporter
·3-min read
A woman views her phone as she passes a branded logo outside the Talktalk headquarters in London, Britain May 10, 2017. REUTERS/Neil Hall
A woman views her phone as she passes a branded logo outside the Talktalk headquarters in London, Britain May 10, 2017. REUTERS/Neil Hall

The telecoms giant TalkTalk (TALK.L) has agreed a £1.1bn ($1.49bn) takeover by shareholders Toscafund and private equity investors Penta.

The company announced on Thursday its investors will receive 97p a share as part of the deal, if they approve the takeover. It marks a 16.4% premium on its share price on 7 October before the offer was first proposed and talks began.

Toscafund is already an investor in TalkTalk, and the telecoms firm said it had a “detailed understanding” of TalkTalk’s business model and the wider sector in the UK. Penta has also focused on telecoms firms in recent years, according to TalkTalk.

The takeover is due to take place in the first quarter of 2021.

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Charles Dunstone, TalkTalk’s chairman, said it would help the company with the “hugely challenging but exciting” rollout of full-fibre broadband.

“Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fibre for businesses and consumers nationwide. The Telecoms industry is going through a fundamental re-set and we are keen to play our part in it," he said.

TalkTalk shares on 17 December after the company backed a takeover. Chart: Yahoo Finance UK
TalkTalk shares on 17 December after the company backed a takeover. Chart: Yahoo Finance UK

Ian West, non-executive director, added: “The independent TalkTalk directors believe, taking into account the advice they have received, that the terms of the cash offer are fair and reasonable and are unanimously recommending that shareholders accept the cash offer."

It came on the same day the company confirmed the departure of its chief finance officer Kate Ferry after three-and-a-half years, and as TalkTalk published its half-year results.

The company posted a statutory pre-tax loss of £3m in the six months to 30 September, compared to a £29m profit in the same period a year earlier. ‘Headline’ revenues slid from £786m to £736m, while net debts were slashed but still stood at £967m.

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The company said it had added fewer new customers during the pandemic, as engineers had been unable to visit customer premises for installations. It also highlighted the closure of third-party overseas call centres because of COVID-19, leading to customer service “challenges.”

Revenue from phone calls also continued to slide, which it said was in line with industry trends. But it said it had seen no material impact from lockdown restrictions in November.

Data usage has also soared more than 40% with more customers at home.

“The importance of fast, reliable and affordable connectivity has never been clearer,” said the company.

Shares were up 1.7% in early trading on the London Stock Exchange on Thursday.

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