South African fixed-line and mobile operator Telkom revealed today that they are in talks to acquire a 100% stake in IT services group Business Connexion (BCX).
“Further to the BCX cautionary announcement released on the Securities Exchange News Service of the JSE Limited on 15 April 2014, shareholders of BCX are advised that on 21 May 2014, BCX entered into an implementation agreement with Telkom in terms of which Telkom, inter alia, offered to acquire (i) the entire issued ordinary share capital of BCX, excluding the BCX ordinary shares held by Business Connexion Proprietary Limited as treasury shares, and (ii) the entire issued “A” ordinary share capital of BCX,” read a joint statement from both companies.
In terms of business model, BCC is considered to be one of the largest ICT service providers when examining their turnover, total assets and staff compliment, and the company is also listed on the Johannesburg Stock Exchange. With staff in the United Kingdom, Dubai and across Africa, it employs over 6 500 people.
It is a key IBM partner for the continent, and the only non-carrier aligned African company to operate two tier 4 data centres.
Telkom cited its desire to provide better services in South Africa as a rationale for the transaction.
“Since April 2013, Telkom 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. BCX is a significant player in the South African ICT services market… and the Proposed Transaction will enable Telkom to expand its existing offerings while at the same time providing scale in IT services,” it said in the statement.
The deal is said to be worth R2.7-billion, and Telkom will pay to the Ordinary Shareholders a cash consideration of R6.60 per Ordinary Scheme Share. If either party decides to renege on the deal, they would have to pay the other party 1% of the deal value.
According to the last circular issued to shareholders, the board of directors currently own just over 14% of the A Shares in Business Connexion, and five major investors including Investec and Old Mutual control 60% of ordinary stock.
By midday Thursday, Telkom stocks were trading at R37.56 per share, down 0.61 from its opening amount of R38.16. Telkom’s stock has risen sharply over the last year, as stocks traded at a mere R12.50 exactly a year ago.
In contrast, BCX’s stock price rose 8.72% by midday Thursday to R6.48 per share.[Image – Shutterstock]