Court nod for BCX sale to Telkom

By Iain Scott, ITWeb group consulting editor

Johannesburg, 21 Jun 2006

The scheme of arrangement by which Telkom is proposing to acquire Business Connexion (BCX) has received High Court approval.

However, yesterday`s order issued by the High Court of SA (Witwatersrand Local Division) to sanction the scheme is subject to the approval of the acquisition by the competition authorities.

Analysts say they expect the Competition Commission to approve the R2.36 billion deal, although critics of Telkom are likely to lodge objections.

"There will be people who jump up and down about the acquisition, because there are a lot of people who are anti-Telkom in principle," one analyst says. "So yes, of course there will be objections."

However, the analysts add that Telkom probably expects this, which may be why the scheme allows for competition authority approval up to 15 December.

The scheme also allows Telkom and BCX to agree to a later date.

Transformation

The court approval comes after BCX shareholders voted last week in favour of the scheme of arrangement.

A scheme of arrangement is a means of making an acquisition. Ordinarily if a bid is accepted by shareholders owning more than 90% of a company, the bidder can force remaining shareholders to accept the offer on the same terms.

However, a scheme of arrangement, which is subject to court sanction, allows a buyer to acquire a company with the approval of just 75% of shareholders at a scheme meeting.

Shareholders owning 99.58% of the BCX shares represented at the scheme meeting voted in favour of the deal.

Telkom is paying R9 per BCX share, and the group has also agreed to BCX paying a dividend of 25c per share ahead of the implementation of the scheme.

The deal is in line with the fixed-line operator`s stated intention to respond to increasing liberalisation of the telecoms sector by transforming itself into a provider of the full spectrum of ICT solutions.

This, according to statements by Telkom CEO Papi Molotsane, includes voice, data, video and Internet services increasingly through broadband penetration.

He said recently that the acquisition of BCX would advance Telkom`s data strategy and add to Telkom`s offerings of IT services in business applications and support management, as well as business process outsourcing.

Telkom plans for BCX to continue to operate as a standalone unit once the deal is finalised, although BCX is to be delisted from the JSE.