A hedge fund boss nicknamed ‘the Rottweiler’ has swooped on the budget broadband provider Talktalk – with a £1.1billion takeover offer.
Martin Hughes has offered 97p a share through his firm Toscafund, which already owns a 29.1 per cent stake in the telecoms company.
The 59-year-old is said to believe Talktalk is undervalued by the market after shares sank to record lows during the coronavirus crisis.
A deal at 97p a share would trigger a £332m payout for TalkTalk’s executive chairman, Sir Charles Dunstone, who is the founder and biggest shareholder with a near-30 per cent stake
Yesterday, Talktalk’s stock rose 17.1 per cent, or 14.2p, to 97.5p.
A deal at 97p a share would trigger a £332million payout for its executive chairman, Sir Charles Dunstone, who is the founder and biggest shareholder with a near-30 per cent stake.
Fellow telecoms tycoon David Ross, who has an 11 per cent stake in the firm, would get £124million.
But the bid is below the £1.5billion, or 135p per share, reportedly offered by Toscafund that was rejected by the board last year.
At that point, Toscafund owned 19 per cent but it has since ramped up its holding to 29.1 per cent, just below Dunstone’s 29.9 per cent.
David Ross, pictured with former partner Michelle Ross who happens to share the same surname, has an 11 per cent stake, meaning he would get £124m if the deal goes through
The hedge fund has said it will not press ahead without Dunstone’s blessing, however, and the 55-year-old could retain a stake if it is taken private.
Revealing the bid to investors yesterday, Talktalk said it had agreed to ‘progress the proposal further’.
Talktalk, which has more than 4m broadband customers, was founded by Dunstone in 2003 as part of the Carphone Warehouse business he started with Ross.
Rottweiler makes move
Toscafund boss Martin Hughes is known as ‘the Rottweiler’ due to his aggressive style.
The 59-year-old has built a reputation for loudly agitating for change at companies he invests in. He founded his hedge fund with Johnny de la Hey in 2000.
Toscafund is chaired by City grandee Martin Gilbert, who set up Aberdeen Asset Management, and has more than £3billion worth of assets under management. It has taken seven public companies private, including telecoms firm Daisy Group in 2014.
‘We invest in companies in times of trouble and provide advisory support,’ Hughes said in 2013.
Opera lover Hughes was a vocal supporter of Brexit. He is worth £455million, according to the Sunday Times Rich List.
It was later spun off and listed separately in 2010 under former chief executive Dido Harding, who now heads NHS Test and Trace.
She left in 2017, two years after a devastating cyber-attack that cost it £60million and led to the details of millions of customers being stolen.
Harding admitted she did not know whether the data had been protected using encryption.
Dunstone returned to take control in 2018 as the firm continued to struggle, putting a renewed focus on providing budget broadband.
It ditched its mobile offering and sold its cable-laying business to Cityfibre.
The bid from Toscafund comes as competition in the UK telecoms sector is heating up, with a merger of mobile operator O2 and broadband and TV provider Virgin Media set to usher in more bundle deals.
But as firms spend billions of pounds on new 5G network equipment and fibre optic cables, investors have shown little enthusiasm for telecoms shares. BT hit an 11-year low earlier this year.
However, analysts believe that Toscafund could flush out other bids for the company. Mobile networks Vodafone and Three could use the company to gain a foothold in the broadband market.
CCS Insight telecoms analyst Kester Mann said those firms might also view Talktalk as a bargain.
Russ Mould, investment director at AJ Bell, said going private would end an ‘unhappy stay on the markets’ – it is now well below its 2015 high of 415.1p.
Mould added: ‘Having been building a stake in recent years, Toscafund may have not unreasonably decided it could do a better job of managing the assets itself out of the glare of public markets.’