Telkom is to make a cash offer to buy out all of Business Connexion’s (BCX’s) shares. The value of the deal will be about R2,7-billion.
As one of the largest ICT and cloud service providers on the JSE, BCX has offices in the UK and Dubai as well as in South Africa. It employs more than 6 700 people in Africa and generates revenue in excess of R6-billion per annum.
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 with strong capabilities in managed IT Infrastructure, including data centres and application development, and the proposed transaction will enable Telkom to expand its existing offerings while providing scale in IT services, which will help reinforce Telkom’s core connectivity business and enhance its convergence strategy.
BCX has an existing convergence strategy, and believes there is sound rationale for the offer to be considered, as major global technological changes are driving the convergence of the IT and the telecommunications industries. This merger would therefore advance BCX’s convergence strategy and present new and exciting opportunities for staff in the greater combined entity.
It is understood that the BCX brand and management team will remain in place in the event of a successful transaction.
“There are clear opportunities that exist between our respective companies. The dynamics of the global ICT industry are changing particularly with the evolution and convergence of technologies that have blurred the lines that once separated telecoms players from the world of information technology,” says Benjamin Mophatlane, CEO of Business Connexion.
BCX and Telkom have complementary capabilities which provide for a natural fit within the client value chain. BCX’s client value proposition would be further enhanced through integrated end-to-end solutions leveraging the combined capabilities of both entities.
BCX also believes that a merger with Telkom would enhance the company’s global attractiveness, particularly on the African continent, by leveraging Telkom’s extended communications network and strategic international relationships to enable additional capabilities with which to service BCX’s multi-national client base.
“It is business as usual for us until all the conditions of the proposed transaction have been fulfilled. Unrelated to the offer, we are currently busy with a re-organisation process which supports the delivery of sustainable growth in the business and enhanced quality of service offerings to our customers. This important process is expected to be completed by the end of our financial year end,” Mophatlane adds.
Telkom’s offer is fully-funded and a full detailed due diligence was undertaken and completed. The proposed transaction will enable the shareholders of BCX to dispose of their shares at a premium to their recent historical traded market price.
Telkom intends to acquire the Ordinary Scheme Shares and A Scheme Shares by way of schemes of arrangement.
In the event that the schemes are successfully implemented, BCX will become a wholly-owned subsidiary of Telkom and the listing of the Ordinary Shares on the JSE will be terminated.
In terms of the Ordinary Scheme, Telkom will pay to the Ordinary Shareholders a cash consideration of R6.60 per Ordinary Scheme Share.
Telkom will fund the Scheme Consideration from its own cash resources. The Takeover Regulation Panel has been provided with an escrow confirmation from Absa Bank in compliance with Takeover Regulations.
The proposed acquisition comes almost seven years after Telkom first tried to buy out BCX, a move that was prohibited by the Competition Tribunal in June 2007.
At that time, the proposed deal was opposed by Dimension Data as well as by the Internet Service Providers Association (ISPA).
