Buyout firm Epiris is in formal talks to buy PXC, TalkTalk's wholesale arm, for about £200m. Combined with a £100m bid for the consumer business, TalkTalk's two divisions would raise roughly £300m, set against a £2bn valuation including debt when the group went private in 2021.
TalkTalk was founded by Sir Charles Dunstone and was once one of Britain's biggest broadband challengers. It is now selling its two divisions against the clock, and the prices on offer show how much equity value has disappeared since the group left the stock market.
The deal
Sky News reported on Friday that Epiris has entered detailed talks to acquire PXC. The move follows the collapse of exclusive discussions with Octopus Investments. People close to the process expect the deal to value PXC at around £200m.
One structure under consideration is a pre-pack administration run by Alvarez & Marsal. That route would move the business to a new owner quickly, but existing shareholders would recover little or nothing.
TalkTalk confirmed on Friday morning that it is in the final stages of the sale process for both businesses and expects to complete the two transactions imminently.
Why the timing matters
TalkTalk faces an end-of-month deadline to complete the disposals because payments are due to creditors. The largest of these is BT Group's Openreach network arm. Analysts have suggested that BT itself could step in to take control of PXC.
For the consumer business, which serves about 1.7 million customers, Opus Broadband has come back with a reduced offer of £100m. If that bid is not accepted, the division could be taken over by Ares Management, TalkTalk's largest lender, with Sir Charles expected to chair the retail operation.
The capital structure
The figures show how steep the losses are. TalkTalk was taken private in 2021 by Sir Charles and Toscafund Asset Management at a valuation of about £2bn including debt. Combined proceeds of around £300m would be less than a sixth of that figure.
Lenders have repeatedly put in fresh money since the take-private. Ares led a further £115m injection as recently as February. At the prices now being discussed, shareholders, bondholders and other lenders all face heavy losses, and Sir Charles and Toscafund remain significant shareholders.
Epiris's wider play
PXC would sit alongside Epiris's pursuit of London-listed Gamma Communications, where the firm is in the middle of a takeover bid. Analysts see substantial financial synergies between PXC's wholesale connectivity business and Gamma's business communications platform.
What's next
Both TalkTalk sales are expected to be settled within days. Deal terms, the final structure and whether a pre-pack is used will determine how much, if anything, reaches the group's creditors further down the capital structure.
Original source: Sky News, via Yahoo Finance UK — https://uk.finance.yahoo.com/news/gamma-suitor-epiris-talks-buy-100600128.html
