Spark mounts $22.7 mln takeover of struggling minnow TeamTalk, offering 78% premium

Tuesday 7th February 2017

Spark New Zealand says its proposed $22.7 million offer for ailing network minnow TeamTalk, amounting to a 78 percent premium for the shares, would give the country's biggest telecommunications group ownership of fibre in Wellington and a wireless rural internet service provider.

Auckland-based Spark will pay TeamTalk investors 80 cents per share in a full takeover, a premium to the 45 cents price the stock last traded at. Spark wants to integrate TeamTalk's services into the larger group, cutting costs by stripping out any duplication and reviewing the business to see what parts of the Wellington-based network can be grown and whether any units should be divested.

"We believe this is a compelling offer, at a significant premium to the current TeamTalk share price, which is unlikely to be achieved by other means," Spark chief executive Simon Moutter said in a statement. "The reality is TeamTalk shares have significantly underperformed relative to the New Zealand market over the last three years, with much lower total returns for investors than the NZX 50 gross return index on a total shareholder return basis."

The looming offer follows TeamTalk's review of operations after the company struggled to integrate the rural ISP Farmside business, acquired in late 2012 for $42 million, which left it with higher debt and flat earnings. TeamTalk shares peaked in January 2013 at $3.20 before issues with the purchase started to emerge.

Spark filed its notice of intention to launch the takeover and will need Overseas Investment Office and Commerce Commission approval to proceed. Spark may waive a condition to cross the 90 percent threshold needed to mop-up hold-out shareholders if it secures control of TeamTalk, in which case it would stack the board with its representatives.

The larger telco company stressed the challenges TeamTalk faces from increased competition to its rural ISP due to the government's rural broadband initiative and the capital needs to upgrade its Wellington CityLink fibre network.

Spark has previously signalled a desire to reduce its reliance on network operator Chorus's regulated copper lines and last year talked up the opportunities wireless broadband offers to grow the budget end of the market.

Shares of Spark last traded at $3.58 and have gained 13 percent over the past 12 months.

BusinessDesk.co.nz

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