MTN Group Will Not Take Over Telkom

Since July, it has been reported that MTN and Telkom have been in talks about MTN purchasing the entirety of Telkom's issued share capital in exchange for shares of MTN or a cash and share combination. But as we noted at the beginning of October, FWA operator Rain also made a bid to Telkom, urging it to buy Rain in return for shares.

Highlights

  • MTN Group Ltd. cancelled negotiations for a takeover proposal on Wednesday.
  • MTN and Telkom have been in talks about MTN purchasing the entirety of Telkom's issued share capital in exchange for shares of MTN or a cash and share combination.
  • Telkom's share price did actually drop by 25% once it was revealed that MTN had withdrawn from the negotiations.

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MTN Group Ltd. cancelled negotiations for a takeover proposal on Wednesday, according to Telkom SA SOC Ltd. Telkom was unable to provide exclusivity because Telkom was unable to do so. The MTN Group's announcement lacked a lot of impact. "Withdrawal of cautionary announcement" was the phrase used in the headline. The MyBroadband website's headline, however, was more representative of how the media reacted to the termination of negotiations between the two South African carriers, MTN and Telkom.

Details Regarding the Conclusion of the Two Parties’ Talks

Whatever your point of view, it is obvious that, as Telkom stated in its own announcement: "After extensive engagements and deliberations between the parties, shareholders are advised that the discussions regarding the Proposed Transaction have terminated, as the parties were unable to reach an agreement to their mutual satisfaction on the process going forward," the discussions regarding the proposed transaction have come to an end.

The Telkom statement that "Telkom was not in a position to provide MTN with commitments around exclusivity" provided a hint as to the cause behind the announcement. But discussions were at an early stage and had not progressed to due diligence, nor had the Telkom board of directors received a binding offer, according to the statement.

Since July, it has been reported that MTN and Telkom have been in talks about MTN purchasing the entirety of Telkom's issued share capital in exchange for shares of MTN or a cash and share combination. But as we noted at the beginning of October, FWA operator Rain also made a bid to Telkom, urging it to buy Rain in return for shares. Although it's difficult to say for sure whether the Rain intervention is the cause, there have been rumours for some time that negotiations on the pricing and parameters of an agreement between MTN and Telkom had stagnated. As a result, this revelation may not come as a great surprise.

Reports indicating a decline in Telkom's share price, however, are undisputed. Telkom's share price did actually drop by 25% once it was revealed that MTN had withdrawn from the negotiations.

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