Hedge fund to take TalkTalk private in £1.1bn acquisition

TalkTalk head office.jpg

UK independent telco TalkTalk is set to be taken over by a hedge fund and a private equity firm for £1.1 billion.

Toscafund Asset Management, which is said to have assets worth £4 billion, bid £0.97 a share for the company. TalkTalk’s co-founder Charles Dunstone has backed the deal.

Tosca is working with Penta Capital, a private equity investor.

The deal has acceptances from owners of 76% of TalkTalk’s shares, including Dunstone, who had an estimated 29.5% a year ago. The deal will see him leave TalkTalk with £320 million once the acquisition is completed in the first quarter of 2021.

The £0.97 price is less than three quarters of the £1.35-a-share offer that Toscafund made informally last year, but TalkTalk’s share price has fallen dramatically from a high of £2.67 in April 2016 to £1.93 a year later. Over the past two years it has hardly been above £1.16 — and has not been over £1 since the pandemic started in March 2020.

The offer is approximately equal to TalkTalk’s market cap, which this morning was £1.14 billion after the share price nudged up to £0.997 — implying shareholders will make a loss on the takeover.

TalkTalk said in October that it had been approached by “funds advised by Toscafund Asset Management” about “a possible cash offer to be made by a newly formed company for the entire issued and to be issued ordinary share capital of the company”. A condition of the offer was “an irrevocable undertaking” from Dunstone.

Dunstone founded Carphone Warehouse, a mobile phone retailer, and started TalkTalk as a competitive telco in 2003, partly through assets acquired from Opal Telecom.

TalkTalk — based in an old soap factory (pictured) next to the Manchester Ship Canal — demerged from Carphone Warehouse ten years ago, a move that left Dunstone as the largest shareholder. In March 2020 it sold its embryonic fibre business, Fibre Nation, to Cityfibre for an undisclosed price.