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TeamTalk shareholders to vote on sale

NZN 28/03/2017 Paul McBeth

TeamTalk shareholders will vote on a plan to sell a controlling stake in its Farmside internet services provider to Vodafone next month, in a deal which is expected to substantially reduce the telecommunication minnow's debt levels.

The company will hold a special meeting on April 12 in Wellington where shareholders will be asked to approve the transaction which will see Vodafone buy 70 per cent of Farmside for $10 million.

They would hold an option to purchase the remaining shares at any time in the next three years for a further $3 million.

Vodafone will also have an option to mop up the remaining Farmside stake if a rival firm builds a 20 per cent-plus interest in TeamTalk, acquires control of the firm, or installs a director to the board.

The transaction will cut TeamTalk's operational costs by about $3.2m, while almost all of the sale proceeds will repay its $33.9m of bank debt which it characterises as the firm's "biggest challenge".

"If the proposed sale is approved, almost all of the $10m cash payment will be applied towards repayment of that debt which will come close to achieving the targeted reduction before the middle of this year," TeamTalk said in its notice of meeting.

The deal could scuttle a $22.7m hostile takeover bid mounted by Spark.

Spark has called TeamTalk's independent valuation range of $1.52-to-$2.11 an "absurd premium", however TeamTalk's board has rejected the offer as being too low and "opportunistic" as it doesn't account for the new management team's strategy to turn the business around.

The Wellington-based company's board unanimously backs the Vodafone deal, which the firm says will immediately cut financing costs and debt levels, providing greater room to invest in upgrading TeamTalk's mobile radio network and Wellington fibre network.

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