TalkTalk rejected Toscafund takeover bid last year

The FTSE-250 phone and broadband supplier TalkTalk Telecom Group rejected a takeover bid last year that would have valued it at close to double its current share price.

Sky News has learnt that Toscafund, the asset manager, wrote to TalkTalk’s board just over a year ago to propose acquiring the company for 135p-a-share.

The offer was rejected by TalkTalk’s board, which is led by founder and executive chairman Sir Charles Dunstone, on the basis that it failed to provide sufficient value for investors, according to City sources.

The disclosure of the bid, which has not previously been made public, will spark renewed speculation that TalkTalk could find itself at the centre of a bidding battle as Britain’s telecoms sector continues to consolidate.

Toscafund, which is headed by the prominent investor Martin Hughes, is understood to have owned 19pc of TalkTalk’s shares at the time it made the proposal.

The asset manager has since increased its stake to 29pc, giving it a virtually identical shareholding to Sir Charles.

In a statement issued in response to an enquiry from Sky News, a Toscafund spokesman confirmed that last year it had “made an indicative offer of 135p to take TalkTalk private, but it fully understands the reasons behind the board rejecting the offer”.

The spokesman added that Toscafund “remains fully supportive of the board and management of TalkTalk”, with a source saying that it had voted in favour of all resolutions at the telecoms group’s recent annual general meeting.

“Toscafund continues to evaluate strategic options for all the companies within its portfolio, particularly those where the London stock market fails to correctly recognise their prospects and strategic optionality, as is clearly the case at TalkTalk.

“Toscafund is aware that UK broadband fibre and mobile participants are undergoing a phase of consolidation with all the benefits that will bring, and believes that the 135p-per-share valuation of 2019 represents a deep line in the sand, given that TalkTalk is in a better condition in 2020 than it was in 2019.”

The fund manager’s statement appears to imply that it is keen to see further takeover offers emerge for TalkTalk – shares in which closed at 74.8p on Monday.

TalkTalk now has a market capitalisation of less than £900m, compared to the £1.5bn implied by the Toscafund bid.

Consolidation and convergence within the telecoms, broadband and pay-television markets have driven a series of substantial corporate deals, the most notable of which has been the £31bn merger of Liberty Global’s Virgin Media with O2, the mobile network owned by Spain’s Telefonica.

TalkTalk itself recently sold its fibre broadband infrastructure arm to CityFibre Holdings.

Sir Charles, who co-founded The Carphone Warehouse and still holds a stake in its successor company, Dixons Carphone, established TalkTalk in 2004.

It has been touted as a takeover candidate for years, with Vodafone, the owner of the Three mobile network and Sky, the immediate owner of Sky News, all frequently tipped as potential bidders.

TalkTalk, which has more than 4m customers across its range of services, says it has weathered the coronavirus pandemic successfully so far, with cost reductions offsetting the impact of trading restrictions and the absence of live sport for several months.

TalkTalk declined to comment on last year’s approach from Toscafund.