Telkom-BCX deadline extended

By Nicola Mawson for Telkom
Johannesburg, 14 Dec 2006

The deadline for Telkom's takeover of Business Connexion (BCX) has been extended to 15 March, following an agreement between the directors of the two companies.

Telkom spokesman Lulu Letlape says the proposed acquisition remains subject to the competition authorities approving the proposed acquisition in terms of the Competition Act, 1998 (Act 89 of 1998) as amended, either unconditionally or subject to such conditions as may be acceptable to Telkom.

BCX CEO Peter Watt was unavailable for comment at the time of publication.

However, this move puts paid to speculation that BCX may have been reluctant to extend the deadline, as it was claimed the protracted process was damaging to BCX's share price and employee morale - concerns Watt expressed at his group's recent annual general meeting.

When the offer was first made, BCX's share was trading at about R9 and has since fallen to about R7.30, prompting some to speculate that the market was not in favour of the takeover.

The deal was recently rejected by the Competition Commission, which recommended the Competition Tribunal not allow it to proceed as the commission felt Telkom could have a price advantage, reducing the ability of other players to compete fairly.

BMI-TechKnowledge analyst Roy Blume says the extension of the deadline grants both parties the opportunity to push for the deal to go through and appeal in case of a rejection by the Competition Tribunal.

While the long delays may negatively impact BCX's shares, Blume says that, at the end of the day, it is likely to be a roller-coaster ride that will smooth out depending on the outcome of the deal. "The longer there is doubt, the more the market price will be affected. However, when the deal was first announced, BCX's share climbed and it will do so again if the deal is approved."

Regarding the forthcoming Competition Tribunal hearing, Telkom's Letlape last month said the company "continues to believe it has a strong case, and will put forward its case to the authority".

Waiting in the wings

Should the R2.4 billion deal not gain approval, at least two other bidders are waiting in the wings.

Bytes Technology Group (BTG) and a "mystery bidder", which had been previously interested in purchasing BCX, are keeping an eye on developments, but maintain Telkom is offering too much.

Peter Riskowitz, BTG financial director, says: "We don't see the value [of BCX] anywhere near to where Telkom is at. BCX's May results were below expectations. If we had to bid again, we would have to revise our numbers."

Telkom's share was trading 0.77% up in early morning trade at R133.01. BCX did not see any shares change hands in early morning trade, but the share closed on Wednesday at R7.23, down from Tuesday's close of R7.29.