Rain sets its eyes fixed on Telkom merger

Rain, a company backed by Patrice Motsepe, former FNB boss Michael Jordaan and OUTsurance co-founder Willem Roos has made a bid to merge with Telkom.

The company said in a statement that the deal, if it goes through, would create a “strong third player to compete with telco duopoly”.

“Rain has made a formal request to present the Telkom board with a proposal which would ultimately result in the merger of the two companies. Although the terms of such a transaction such as valuation and structure would still need to be agreed, Rain believes there is a compelling business case in combining the businesses,” the company said.

Rain’s proposal comes shortly after Africa’s biggest wireless carrier MTN said in July that it was in talks with Telkom over a merger.

MTN and Telkom announced that they discussing a merger but cautioned those discussions are at “an early stage and there is no certainty that the transaction will be consummated”.

“Shareholders are advised that MTN Group Limited 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 the time. MTN also released a similar statement.

For the deal to go through, it would need buy-in from the government, which has a 40% stake in Telkom. Another significant player is the Public Investment Corporation (PIC), which manages public servants’ pensions.

The PIC has significant exposure on both sides, owning a 14% stake in Telkom, whose CEO is Serame Taukobong, and a 22% interest in MTN Group, which is headed by Ralph Mupita.

Sunday World reported on Sunday that Fitch Solutions, a unit of the Fitch Group, said the proposed tie-up between MTN and Telkom is likely to face regulatory headwinds and does not see the deal going through in its current form.

The companies said MTN intends to acquire “the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN”.

“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.

Also read: Fitch feels deal between MTN and Telkom won’t fly

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Kabelo Khumalo

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