Takeover fears plague BCX

Johannesburg, 24 Aug 2007

Despite Telkom's failed bid to acquire the company, Business Connexion (BCX) is aware it could still be a takeover target, says new BCX CEO Benjamin Mophatlane.

"There's no getting around the fact that the Telkom bid hurt us and we are very aware that we could find ourselves in a similar position again.

"We've got to figure out how to avoid that happening or alternatively find a better way to deal with the process," he says.

Losing confidence

Telkom first submitted a firm offer for BCX in November 2005. Almost two years later, the Competition Tribunal refused to give its blessing to the merger.

In that time, the company's share price increased from R6 to highs of around R8.81. However, most of the gains made during this period have disappeared, with its shares closing at R6.45 yesterday.

Similarly, BCX's financial performance has demonstrated its management's self-admitted struggles with the transaction's long approval process.

Its annual results for the year ended May 2006 saw revenue rise by 14% and operating profit decline 22%. Yesterday's release of its 2007 annual results saw revenue climb 11%, with operating profit again decreasing, this time by 25%.

"Our 2007 financials were not the best of results, but under the circumstances I think they were OK. Our focus now is to turn around the business and leave the Telkom acquisition behind us," comments Mophatlane.

Threats ahead?

Although Mophatlane is confident the company is capable of significantly upping its performance, its shareholding structure leaves it vulnerable to friendly and hostile overtures.

"We have a very open shareholding structure and we don't have an anchor tenant in the listed entity. This is something we have to address, or else we could be continually plagued by offers from the market," he explains.

As of 25 May, BCX's major shareholders encompassed the Public Investment Commission with 13.7%, Sanlam Investment Management (11%), Allan Gray Investment Council (9%), Stanlib Asset Management (9%) and Prudential Portfolio Managers (7%).