Trading Day – Telkom receives merger offer from Rain

In an announcement on SENS today, Telkom said it had received a formal merger offer from Rain but declined to express a view on it.

Rain argued that such a merger would create a strong third player to compete with Vodacom and MTN’s duopoly.

In other news, Mr Price finalized its acquisition of Studio 88 for R3.6 billion, and South Africa’s producer price inflation for August increased by 16.6%.

Here is the biggest news of the day.

• Telkom received a formal merger offer from Rain, but declined to express a view on it. Rain drew criticism in early August for publishing its offer in the media without receiving approval from the Takeover Regulation Panel. It has since corrected that and submitted a formal offer to Telkom on 14 September. The deal would see Telkom acquire Rain in exchange for newly issued shares in Telkom. Telkom commented that the “Board is evaluating the Rain Proposal and is not yet in a position to express a view thereon.”

• Mr Price finalised its acquisition of Studio 88 for R3.6 billion. All conditions for the deal, announced early April, have been fulfilled including approval from the competition authorities. The transaction will close on Monday and will see Mr Price acquire a 70% stake in Blue Falcon Trading 188, which owns Studio 88.

• South Africa’s producer price inflation for August increased 16.6% year-over-year. This is down from last month, when it peaked at 18% year-over-year.

• Kibo Energy looks to list a dedicated renewables company on the development market of the London Stock Exchange (AIM board) by early 2023. Kibo plans to retain a 75% stake in the company, which will be named Ultimate Sustainable Energy, and hopes to raise between £7 million and £10 million. The new company would fund waste-to-energy as well as biofuel projects in SA and the UK.

• The Motus board clarified director share sales. In a secondary announcement released yesterday, the board explained that the share sale comprised about half of their vested LTIs and was sold to cover income tax liabilities. The sale of Corne Venter’s shares was not clarified. Director dealings are required to be disclosed within 3 business days. While the sale of shares commenced on 15 September, Motus only declared the director dealings on 28 September after the full block of shares had been disposed of.

• Apple shares fell nearly 5% in response to analyst downgrade. Bank of America changed their rating on Apple from a Buy to Neutral and cut their price target from $185 to $160. The downgrade came on the back of a Bloomberg report Wednesday that said Apple had told some suppliers to abandon plans to ramp up production for its new iPhone 14 after failing to see as high demand as anticipated. Shares of most Apple suppliers also fell in early morning trading on Asian stock exchanges.

• Porsche shares climbed in one of the biggest IPOs in Europe’s history. The non-voting preference shares were priced at the top end of their range of 76.50 Euro to 82.50 Euro, but traded at 84.50 Euro in early morning trading and peaked at 86.76 Euros intraday. However, the shares closed at 82.50 Euro again, returning to their issue price. Only a 12.5% stake of the company was listed, with Volkswagen retaining the rest.

• The German inflation reading of 10.0% reinforced expectations for more aggressive policy from the European Central Bank (ECB).

• Liz Truss defended her controversial tax cuts and vowed to press on despite plunge in the currency and bond market sell-off.

• Woolworths received a credit rating upgrade. S&P Global Ratings has revised their long-term national scale credit rating upwards from ZaA+ to ZaAA.