Spark New Zealand has responded to TeamTalk's unanimous recommendation to shareholders to reject the telco’s offer of 80 cents per share, branding the company’s valuation “absurd”.
Following a string of discussions and deliberations, TeamTalk directors strongly advised shareholders against succumbing to a “hostile takeover bid” from the telco giant, questioning the value of such a move.
Specifically, the publicly-listed telco provider issued a report by independent advisor Grant Samuel, stating that the underlying value of the company's shares is between $1.52 to $2.11 per share, not the 80 cents per share offered by Spark.
“TeamTalk’s Directors did not encourage or solicit Spark’s offer,” TeamTalk Chairman, Roger Sowry, said.
“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.
“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.”
In response however, Spark has questioned the reliability of the independent report, claiming that the valuation “lacks real world credibility”.
“The top end of the range represents a premium to the last trading price before the Spark notice of intention of 369 per cent, which is patently absurd,” Spark Chief Financial Officer, David Chalmers, said.
“This report asks shareholders to have enormous faith that the TeamTalk Board, many of whom are the same team which has led TeamTalk into what Grant Samuel refers to as the “ill-fated” acquisition of Farmside, and more recent “disarray”, will deliver the huge improvement relied on in the valuation.”
As reported by Reseller News, Spark first registered its interest in acquiring the struggling company in early February, filing a notice of its intention to make a full takeover offer amounting to $22.7 million.
Since then however, TeamTalk directors have strongly opposed the move, advising investors to not sell shares or enter into a commitment to accept any proposed offer from the telco giant.
“Spark’s predatory offer has been tactically made before the company and its shareholders could benefit from the turnaround strategy implemented late last year,” TeamTalk CEO, Andrew Miller, added.
“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, as the half-yearly results to 31 December 2016 have demonstrated.
As a small operator in the New Zealand telco market, TeamTalk’s financial performance has declined over the last few years, with a number of profit downgrades, and it faces significant re-investment requirements across its businesses.
“Were Spark to succeed, TeamTalk’s shareholders would be denied the long-term benefits of the investment made in the company’s turnaround,” Miller claimed.
“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. Spark’s offer is $1.02 below the mid-point range of the Grant Samuel value range.
“Accordingly, we are firmly of the view that shareholders will be much better served by staying the course and benefitting from the uplift in TeamTalk’s performance than selling their shares for 90 per cent to 164 per cent less than the assessed fair value to Spark.”