Thursday 23 March 2017 09:22 AM
TeamTalk advises shareholders to reject Spark's 'opportunistic' takeover offer
By Tina Morrison
March 23 (BusinessDesk) - TeamTalk has advised its shareholders to reject a "hostile and opportunistic" takeover offer by Spark New Zealand, saying the price is below an independent valuation and seeks to take advantage of a low point in its shares.
Auckland-based Spark, New Zealand's biggest telecommunications group, has offered 80 cents per share for TeamTalk, a 78 percent premium to where TeamTalk shares traded before Spark announced its intentions in February. However Wellington-based TeamTalk said today that a report by independent adviser Grant Samuel & Associates found the underlying value of TeamTalk is between $1.52 to $2.11 per share, prompting its directors to unanimously recommend shareholders reject the offer.
“TeamTalk’s directors did not encourage or solicit Spark’s offer. From the outset, we saw Spark’s offer as a hostile and opportunistic attempt to exploit a low point in TeamTalk’s recent trading history and before TeamTalk’s shareholders benefited from the turnaround strategy underway," said TeamTalk chair Roger Sowry. "The Grant Samuel report validates our earlier assessment that Spark’s offer is woefully inadequate. The Spark offer fails to reflect the value of TeamTalk’s new strategy, strong leadership and forecast growth as demonstrated in our recent results announcement, nor does it attribute any value to the significant synergies and strategic benefits that Spark would capture in the unlikely event their offer were to succeed.
"It is an attempt to gain control of TeamTalk’s strategic assets for significantly less than the company’s fair value."
Spark's bid came at a time when New Zealand's rapidly changing telecommunications market created headwinds for TeamTalk, resulting in a series of earnings downgrades as margins have come under increasing pressure. Spark has previously signalled a desire to reduce its reliance on network operator Chorus's regulated copper lines and talked up the opportunities wireless broadband offers to grow the budget end of the market. A takeover of TeamTalk would give Spark ownership of fibre in Wellington and a wireless rural internet service provider.
“Spark’s predatory offer has been tactically made before the company and its shareholders could benefit from the turnaround strategy implemented late last year," said TeamTalk chief executive Andrew Miller. "It is an attempt to exploit the challenges the company faced during 2016. Those challenges have now largely been addressed and TeamTalk is profitable again."
"Were Spark to succeed, TeamTalk’s shareholders would be denied the long-term benefits of the investment made in the company’s turnaround," Miller said. "In return for a possible one-time 80 cents per share, shareholders would forgo any future dividends and hand control to Spark at a huge discount."
TeamTalk shares last traded at 78 cents, valuing the company at $22.1 million. Spark's offer values the company at $22.7 million.