Carlyle hangs up on Kingston talks

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Takeover talks between Kingston Communications, the Hull-based group, and Carlyle, the US private equity house, have collapsed.

As a result, shares in the telecommunications operator, whose distinctive white telephone boxes are a feature of Humberside, fell 11 per cent on Friday.

Kingston said that the two parties had failed to agree on both the price and structure for a deal.

The shares were also undermined by a warning that earnings in Kingston’s corporate telecoms services businesses would fall short of expectations.

The company said it would take a further, unspecified, impairment charge on its national network infrastructure. This would be to reflect its falling earnings profile due to strong price competition and the shift to mobile use and e-mail. The network currently has a book value of £120m.

The shares closed down 7¼p at 59¾p, still above the 54½p they were before confirmation of takeover talks in November.

The negotiations dragged on for so many months because of the bureaucracy involved in dealing with Kingston’s biggest shareholder, Hull City Council, which owns 31 per cent.

Kingston has always declined to identify the bidder ever since it announced in November that it has received an approach that might lead to a bid. It later emerged that Carlyle had made the approach.

The buy-out group was thought to have been willing to pay up to 85p per share, which would have valued the operator’s equity at £437m.

Net debt stood at just under £130m at September 30 last year.

One source close to the company last night dismissed the idea that Carlyle had ever suggested it might pay that much. “That price was never communicated to any of the parties,” he said.

The source also suggested that Kingston’s involvement in any strategic
consolidation in the sector, which analysts believe is inevitable because of the highly competitive environment in the UK, would have to wait until it was
clear how rivals could access BT’s next-generation network, which is being rolled out over the next three years.

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