Rain’s Telkom merger announcement declared illegal
Data-only network Rain is taking legal advice over its controversial proposal to merge with telephony group Telkom.
This, after the African Rainbow Capital-owned data-only network Rain yesterday boldly asked to make a formal request for a merger with Telkom.
Rain’s announcement came as Telkom is in ongoing discussions with MTN, which wants to take over the telephony company.
However, Rain’s proposal has been met with resistance from the Johannesburg Stock Exchange’s (JSE’s) Takeover Regulation Panel (TRP), which says Rain acted illegally in making its proposal public.
“We are taking legal advice,” Vivian Ngalo, Rain’s chief communications officer, told ITWeb.
According to Rain, the proposed merged Telkom and Rain entity would create a formidable third major player to compete with what is effectively a duopoly in South Africa.
In a statement yesterday, the TRP says it has noted and expressed “grave” concerns regarding Rain’s potential offer to merge with Telkom.
“We wish to inform the market that the announcement was issued by Rain without the prior approval of the TRP as required in terms of Regulation 117 of the Companies Regulations,” says the TRP in a statement on the JSE Stock Exchange News Service (SENS).
The panel is established in terms of Section 196 of the Companies Act as a juristic person. It reports to the minister of trade, industry and competition. It functions as an organ of state within the public administration, but as an institution outside the public service.
Furthermore, the panel says Rain’s announcement was issued notwithstanding its instructions to Rain that no such announcement should be made without the prior approval of the TRP.
“Accordingly, the publication of the announcement by Rain is unlawful, and Rain has been instructed to retract the announcement. In the circumstances, all parties (ie, shareholders) and the market are advised to disregard the announcement.”
Meanwhile, Telkom today responded on SENS, saying: “Telkom can confirm that no offer or proposal has been received from Rain. If an offer or formal proposal is received from Rain, the board of Telkom will consider it in accordance with its legal obligations.
“Shareholders are further referred to the cautionary announcement issued by Telkom on 15 July 2022 in relation to discussions between Telkom and MTN regarding MTN acquiring the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN.”
According to Telkom, those discussions are continuing and accordingly, shareholders are advised to continue to exercise caution when dealing in Telkom securities.