Telkom’s share price plunged 20% in early trade on Wednesday after the company announced that talks of a merger with MTN had fallen through.
The market reacted swiftly and wiped off millions of rands in Telkom’s value on the JSE.
The two companies announced in July that they were in talks about a merger but cautioned that the discussions were at “an early stage and there is no certainty that the transaction will be consummated”.
“Shareholders are advised that MTN Group and Telkom have entered into discussions in relation to MTN acquiring the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN,” the statement from Telkom read at a time.
MTN also released a similar statement.
However, Telkom confirmed on Wednesday what has been market speculation for weeks, that the deal was dead on arrival.
“MTN terminated discussions in relation to the MTN proposal on 18 October 2022, as Telkom was not in a position to provide MTN with assurances around exclusivity,” Telkom said in a statement early on Wednesday.
“[The] discussions were at an early stage and had not progressed to due diligence nor had a binding offer been received by the Telkom board of directors.”
Fitch Solutions, a unit of the Fitch Group, said in September the proposed tie-up between MTN and Telkom was likely to face regulatory headwinds and did not see the deal going through.
“The upheaval in market dynamics that would occur in the event of MTN’s acquisition of Telkom will stimulate a substantial level of regulatory scrutiny, and consequently we believe that a deal in its current form [MTN’s total acquisition of Telkom] will be denied by the Competition Commission,” Fitch said in a research note.
Sunday World reported in July that several ministers in the economic cluster had raised objections to the mooted deal.
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