Hull telco’s directors, major shareholders in favour of pension fund buyout, but other offers could still come in

KCom’s board of directors has agreed a £504 million takeover deal with pension fund Universities Superannuation Scheme Limited (USSL).

The Hull-based telco said the deal, which comes in at 97 pence per share, represents a 33.8% premium on its closing price on the last practicable date and is 38% above its three-month average.

KCom’s two biggest shareholders, Teleios Capital Partners and Invesco Asset Management, with around 25.5% between them, have signed irrevocable undertakings to vote in favour of the deal, while smaller shareholder Majedie Asset Management, which has a 3.3% stake, has signed a non-binding letter of intent to back the transaction.

Thus it seems likely the deal will pass the shareholder vote. However, anonymous sources told the Financial Times that a number of potential rival bidders remain interested in the company and a counter-offer could still emerge. KCom has been linked with a handful of telecoms players, including UK cable operator Virgin Media.

Universities Superannuation Scheme – which provides pensions to 350 universities and higher education establishments and had £64 billion worth of assets under management as of 31 March last year – is clearly another investor attracted by the solid returns offered by infrastructure assets in the telecoms sector.

Should the KCom deal go ahead, USSL said it will carry out a strategic review looking at KCom’s operating model, service offerings and cost structure, and will seek to identify "new opportunities for additional investment to drive profitable growth within the HEY (Hull and East Yorkshire) business, in particular the potential to offer new services and meaningfully expand and accelerate the fibre network build-out and develop employee capabilities within the business."

It will also review its options for KCom’s National Network Services and Enterprise businesses, including a possible sale of both to a third party.