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TalkTalk Telecom Gp (TALK)

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Thursday 17 December, 2020

TalkTalk Telecom Gp

Recommended Acquisition

RNS Number : 9797I
TalkTalk Telecom Group PLC
17 December 2020
 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

THIS ANNOUNCEMENT IS  NOT A PROSPECTUS OR A PROSPECTUS EXEMPT DOCUMENT AND TALKTALK SHAREHOLDERS SHOULD NOT MAKE ANY DECISION IN RELATION TO THE CONSIDERATION SHARES EXCEPT ON THE BASIS OF THE INFORMATION TO BE CONTAINED IN THE SCHEME DOCUMENT WHICH IS PROPOSED TO BE PUBLISHED IN DUE COURSE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

17 December 2020

RECOMMENDED ACQUISITION

of

TALKTALK TELECOM GROUP PLC

by

TOSCA IOM LIMITED

to be implemented by means of a scheme of arrangement under Part 26 of the Companies Act 2006

Summary

· The board of Tosca IOM Limited (the "Offeror") and the Independent TalkTalk Directors are pleased to announce that they have reached agreement on the terms of a recommended acquisition by the Offeror of the entire issued and to be issued ordinary share capital of TalkTalk (the "Acquisition").

· It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act (the "Scheme"). However, the Offeror reserves the right to elect (with the consent of the Panel) to implement the Acquisition by way of a Takeover Offer.

· Under the terms of the Acquisition, Scheme Shareholders will be entitled to receive:

for each Scheme Share    97 pence in cash (the "Cash Offer")

· Based on the Offer Price, the terms of the Cash Offer value the entire issued ordinary share capital of TalkTalk at approximately £1,112 million.

· The Offer Price represents a premium of approximately:

· 16.4 per cent. to the Closing Price of 83.3 pence for each TalkTalk Share on 7 October 2020 (being the last Business Day before the commencement of the Offer Period);

· 25.8 per cent. to the volume-weighted average price of 77.1 pence for each TalkTalk Share for the three month period ended 7 October 2020; and

· 17.3 per cent. to the volume-weighted average price of 82.7 pence for each TalkTalk Share for the six month period ended 7 October 2020.

· As an alternative to the Cash Offer, Scheme Shareholders (other than Scheme Shareholders resident or located in a Restricted Jurisdiction) may elect to receive one unlisted ordinary share in the capital of the Offeror (a "ConsiderationShare") for each Scheme Share held (the "Alternative Offer"). A Scheme Shareholder may elect to take up the Alternative Offer in respect of all or part of his holding of Scheme Shares. The terms and conditions of the Alternative Offer are set out in paragraph 12 of this Announcement and a summary of the rights attaching to the Consideration Shares is set out in Appendix 4 to this Announcement.

· The Offeror is a newly-incorporated company, formed at the direction of Toscafund and Penta, for the purposes of the Acquisition. Toscafund is a leading alternative asset manager based in London. Toscafund has been a supportive investor in TalkTalk since 2016 and has a detailed understanding of TalkTalk's business model as well as the telecoms sector in the UK. Penta is an active private equity investor in UK mid-market companies. Over the last several years, Penta has sought to invest in well-positioned market leaders, similar to TalkTalk, with select investments in the telecoms and telecoms infrastructure sector, including Daisy Group, Six Degrees Group, SpiriTel and Wireless Infrastructure Group.

· TalkTalk is the UK's leading value-for-money connectivity provider, supplying landline, broadband, TV and mobile services to over four million customers. TalkTalk's fixed-line unbundled network currently covers approximately 96 per cent. of UK homes. The only comparable fixed-line unbundled network is operated by Sky and covers over 90 per cent. of UK homes. The network provides services to consumers through the TalkTalk brand, to businesses through TalkTalk Business, and by wholesaling to resellers. Since entering the market in the early 2000s, TalkTalk has a proud history as an innovative challenger brand, and is committed to providing simple, affordable, reliable and fair connectivity to everyone.

Strategic rationale

· Tosca Penta believes that TalkTalk has demonstrated resilient performance during 2020 and notes the material decrease in its share price over the last 12 months. Tosca Penta has, therefore, concluded that operating in the public listed markets is not optimal for TalkTalk and that the next stages of its investment, strategy and long term growth can all be best delivered as a private company, without the significant governance, cost, regulatory and financial reporting burdens of a company listed on the London Stock Exchange. Tosca Penta further believes that TalkTalk will benefit from access to different forms of equity and debt financing structures that are not readily available to listed companies.

Recommendation

· The Independent TalkTalk Directors, who have been so advised by Barclays and Deutsche Bank as to the financial terms of the Cash Offer, each consider the terms of the Cash Offer to be fair and reasonable. In providing their advice to the Independent TalkTalk Directors, Barclays and Deutsche Bank have each taken into account the commercial assessments of the TalkTalk Directors, including the Independent TalkTalk Directors. Barclays and Deutsche Bank are each providing independent financial advice to the Independent TalkTalk Directors for the purposes of Rule 3 of the Code.

· Accordingly, the Independent TalkTalk Directors intend to recommend unanimously that the Scheme Shareholders who are entitled to vote at the Court Meeting vote (or procure the vote) in favour of the Scheme at the Court Meeting and TalkTalk Shareholders who are entitled to vote at the General Meeting vote (or procure the vote) in favour of the Resolutions to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), as the Independent TalkTalk Directors who are interested in TalkTalk Shares have irrevocably undertaken to do in respect of their own beneficial holdings of, in aggregate, 707,200 TalkTalk Shares representing, in aggregate, approximately 0.062 per cent. of the issued ordinary share capital of TalkTalk on the Latest Practicable Date.

· The Non-independent TalkTalk Directors have not participated in the decision to make the recommendation referred to above as they have either irrevocably undertaken to elect for the Alternative Offer in respect of all of their holdings of TalkTalk Shares and/or are expected to be appointed to the board of directors of the Offeror following the Acquisition becoming Effective.

· The Independent TalkTalk Directors consider that, in deciding whether or not to elect for the Alternative Offer, the Scheme Shareholders should take their own independent advice and consider carefully the disadvantages and advantages of electing for the Alternative Offer (including, but not limited to, those set out below) in light of their own financial circumstances and investment objectives.

Disadvantages of electing for the Alternative Offer

· The Consideration Shares will be unlisted and will not be admitted to trading on any stock exchange and will, therefore, be illiquid. As a result, any assessment of the value of the Consideration Shares should take into account an individual shareholder's assessment of an appropriate liquidity discount.

· The Consideration Shares will be of uncertain value and there can be no assurance that they will be capable of being sold in the future.

· TalkTalk is currently listed on the premium listing segment of the Official List of the FCA and traded on the London Stock Exchange's main market for listed securities. Certain standards and protections afforded to shareholders in a premium listed company will be substantially different to a shareholding in an unlisted private company which a Scheme Shareholder would receive as a result of electing for the Alternative Offer.

Advantages of electing for the Alternative Offer

· The Alternative Offer allows Scheme Shareholders to invest directly in the Offeror, providing continued economic exposure to TalkTalk under private ownership.

· From completion of the Acquisition, the Consideration Shares will rank economically pari passu with the Offeror Ordinary Shares in issue at the time the Consideration Shares are allotted and issued, including the right to receive and retain certain dividends and other distributions declared, made or paid by reference to a record date falling after the Effective Date.

· The Independent TalkTalk Directors, Barclays and Deutsche Bank have considered the disadvantages and advantages outlined above in relation to the Alternative Offer.

· Barclays and Deutsche Bank are unable to advise the Independent TalkTalk Directors as to whether or not the financial terms of the Alternative Offer are fair and reasonable. This is because of the significant and variable impact the disadvantages and advantages of the Alternative Offer may have to individual Scheme Shareholders.

· Accordingly, the Independent TalkTalk Directors cannot form an opinion as to whether or not the terms of the Alternative Offer are fair and reasonable and are not making any recommendation to Scheme Shareholders as to whether or not they should elect for the Alternative Offer. Scheme Shareholders are encouraged to take into account the disadvantages and advantages highlighted above, as well as their individual circumstances, when deciding whether or not to elect for the Alternative Offer in respect of all or part of their holding of Scheme Shares.

· Scheme Shareholders should also ascertain whether acquiring or holding Consideration Shares is affected by the laws of the relevant jurisdiction in which they reside and consider whether Consideration Shares are a suitable investment in light of their own personal circumstances. Scheme Shareholders are, therefore, strongly recommended to seek their own independent financial, tax and legal advice in light of their own particular circumstances and investment objectives before deciding whether to elect for the Alternative Offer (whether in respect of part of their holding of Scheme Shares or otherwise). Any decision to elect for the Alternative Offer should be based on independent financial, tax and legal advice and, to the extent available in such Scheme Shareholder's jurisdiction, consideration of the Scheme Document (once published).

Irrevocable undertakings

· Pursuant to the irrevocable undertakings received from the Independent TalkTalk Directors referred to above, each of the Independent TalkTalk Directors who is interested in TalkTalk Shares has irrevocably undertaken to vote (or procure the vote) in favour of the Scheme at the Court Meeting and in favour of the Resolutions to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer) in respect of their entire beneficial holding of Scheme Shares but has not irrevocably undertaken to elect for the Alternative Offer.

· In addition to the irrevocable undertakings received from the Independent TalkTalk Directors referred to above, the Offeror has received irrevocable undertakings from Sir Charles Dunstone, Roger Taylor, Tristia Harrison, John Gildersleeve and Timothy Morris (the "Rollover Management Shareholders") to: (a) be bound by the terms of the Scheme and to vote (or to procure the voting) in favour of the Scheme at the Court Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer); and (b) elect for the Alternative Offer (subject to the terms and conditions of the Alternative Offer set out in paragraph 12 of this Announcement), in each case in respect of their entire beneficial holding of Scheme Shares. In aggregate, this represents 360,283,023 TalkTalk Shares, being all of the TalkTalk Shares currently beneficially held by such individuals, and approximately 44.60 per cent. of the TalkTalk Shares eligible to vote at the Court Meeting as at the Latest Practicable Date.

· On behalf of the Tosca Investors, Toscafund has irrevocably undertaken to be bound by the terms of the Scheme and to elect for the Alternative Offer in respect of part of the holdings of Scheme Shares to which the Tosca Investors are beneficially entitled (subject to the terms and conditions of the Alternative Offer set out in paragraph 12 of this Announcement).

· As a result of Toscafund's connection with the Offeror, the TalkTalk Shares to which the Tosca Investors are beneficially entitled are not able to be voted at the Court Meeting. Such TalkTalk Shares are, however, subject to the Scheme and the Tosca Investors will undertake to be bound by its terms.

· In aggregate, therefore, the Offeror has received irrevocable undertakings to vote in favour of:

· the Scheme at the Court Meeting in respect of 360,990,223 TalkTalk Shares, representing approximately 31.49 per cent. of the issued ordinary share capital of TalkTalk and approximately 44.68 per cent. of the Scheme Shares eligible to vote at the Court Meeting, in each case on the Latest Practicable Date; and

· the Resolutions at the General Meeting in respect of 360,990,223 TalkTalk Shares, representing approximately 31.49 per cent. of the issued ordinary share capital of TalkTalk on the Latest Practicable Date.

· The irrevocable undertakings received from the Independent TalkTalk Directors who are interested in TalkTalk Shares and the Rollover Management Shareholders will lapse and cease to be binding if, inter alia, a competing offer from a third party for the entire issued and to be issued share capital of TalkTalk is announced, pursuant to Rule 2.7 of the Code, at a price per TalkTalk Share which is (or is equivalent to) at least 115 pence per TalkTalk Share. Further details of these irrevocable undertakings are set out in Appendix 3 to this Announcement.

General

· The Acquisition will be subject to the Conditions and certain further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document including, among other things: (i) the approval of Scheme Shareholders at the Court Meeting and the passing of the Resolutions at the General Meeting; (ii) the sanction of the Scheme by the Court; and (iii) the Scheme becoming Effective no later than the Long Stop Date. In order to become Effective, the Scheme must be approved by a majority in number of Scheme Shareholders eligible to vote, representing at least 75 per cent. of the voting rights of Scheme Shareholders eligible to vote, in each case present and voting, either in person or by proxy, at the Court Meeting and at any separate class meeting which may be required by the Court or at any adjournment of such meeting.

· If any dividend or other distribution is announced, declared, made, payable or paid in respect of the TalkTalk Shares on or after the date of this Announcement and prior to the Effective Date, the Offeror reserves the right to reduce the consideration payable in respect of each TalkTalk Share under the terms of the Acquisition by the amount of all or part of any such dividend or other distribution. If the Offeror exercises this right or makes such a reduction in respect of a dividend or other distribution, TalkTalk Shareholders will be entitled to receive and retain that dividend or other distribution.

· Full details of the Scheme will be included in the Scheme Document, together with notices of the Court Meeting and the General Meeting.  Subject to the Scheme Document being sent to TalkTalk Shareholders as soon as reasonably practicable following the Court granting permission to convene the Court Meeting (and subject to the availability of the Court in such respect), the Panel has consented to a posting date later than 28 days following the date of this Announcement. The Court is expected to grant such permission at a hearing on 3 February 2021.

· Subject to the satisfaction or waiver of the Conditions, it is expected that the Scheme will become Effective in the first quarter of 2021.

Ian West, Senior Non-Executive Director, on behalf of the Independent TalkTalk Directors, commented:

"Having considered in detail the best interests of all shareholders and TalkTalk as a whole, the Independent TalkTalk Directors believe that the cash offer from Toscafund provides an opportunity for shareholders to recognise immediate value for their shares at a premium of approximately 26% to volume-weighted average price for the three month period ended 7 October 2020. The Independent TalkTalk Directors have also taken into account the risks associated in achieving TalkTalk's strategic ambitions and the wide support that Toscafund would provide in this regard. The Independent TalkTalk Directors believe, taking into account the advice they have received, that the terms of the cash offer are fair and reasonable and are unanimously recommending that shareholders accept the cash offer."

Commenting on the Acquisition, Sir Charles Dunstone, TalkTalk's Chairman, said:

"I am pleased to have the opportunity to continue to be a major shareholder in TalkTalk. My decision underlines my passion for the company and the confidence the senior management team and I have about our journey ahead. That said, as the UK transitions to full fibre we have a hugely challenging, but exciting opportunity. Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fibre for businesses and consumers nationwide. The Telecoms industry is going through a fundamental re-set and we are keen to play our part in it."

This summary should be read in conjunction with, and is subject to, the full text of this Announcement and its Appendices.

The Acquisition will be made subject to the Conditions and further terms set out in Appendix 1 and to the full terms and conditions which will be set out in the Scheme Document. The sources and bases of calculation of certain information contained in this Announcement are set out in Appendix 2. Details of the irrevocable undertakings given in relation to the Acquisition are set out in Appendix 3. A summary of the key rights attaching to the Consideration Shares is set out at Appendix 4. Certain definitions and terms used in this Announcement are set out in Appendix 5.

Enquiries:

Panmure Gordon (UK) Limited (financial adviser to the Offeror)

Dominic Morley

Nick Lovering

Alina Vaskina

Tel: +44 (0) 20 7886 2500

Maitland/AMO (Media enquiries for Tosca Penta)

Neil Bennett

Jason Ochere

 

Tel: +44 (0) 207 379 5151

Barclays Bank PLC, acting through its Investment Bank (Joint lead financial adviser, joint Rule 3 adviser and joint corporate broker to TalkTalk)

Robert Mayhew

Derek Shakespeare

Alex Evans

Akshay Majithia

 

Tel: +44 (0) 20 7623 2323

Deutsche Bank AG, London Branch (Joint lead financial adviser, joint Rule 3 adviser and joint corporate broker to TalkTalk)

James Arculus

Matt Hall

David Ibanez

Anna Mills

 

Tel: +44 (0) 20 7545 8000

Lazard & Co., Limited (financial adviser to TalkTalk)

Cyrus Kapadia     

Nicholas Page

  Tel: +44 (0) 20 7187 2000

 

 

TalkTalk

Tim Warrington, Head of Investor Relations

Dominic Laurie, Head of Communications and Campaigns

 

Tel: +44 (0) 7775 414 240

      Tel: +44 (0) 7814 810 626

 

 

Dickson Minto W.S. is acting as legal adviser to Tosca Penta and the Offeror. Osborne Clarke LLP is acting as legal adviser to TalkTalk.

The person responsible for arranging the release of this Announcement on behalf of the Offeror is Torquil Macnaughton, a director of the Offeror.

Important notices relating to financial advisers

Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised and regulated in the United Kingdom by the FCA, is acting as financial adviser exclusively for the Offeror and Tosca Penta and for no-one else in connection with the Acquisition and the matters described in this Announcement and will not be responsible to anyone other than the Offeror and Tosca Penta for providing the protections afforded to clients of Panmure Gordon nor for providing advice in relation to the Acquisition or any other matters referred to in this Announcement.

Barclays Bank PLC, acting through its Investment Bank, ("Barclays"), which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting exclusively for TalkTalk as joint financial adviser, joint Rule 3 adviser and joint corporate broker and for no-one else in connection with the Acquisition and the matters described in this Announcement and will not be responsible to anyone other than TalkTalk for providing the protections afforded to clients of Barclays or for providing advice in relation to the Acquisition or any other matters referred to in this Announcement.

In accordance with the Code, normal United Kingdom market practice and Rule 14e-5(b) of the US Exchange Act, Barclays and its affiliates will continue to act as exempt principal trader in TalkTalk securities on the London Stock Exchange. These purchases and activities by exempt principal traders which are required to be made public in the United Kingdom pursuant to the Code will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com. This information will also be publicly disclosed in the United States to the extent that such information is made public in the United Kingdom.

Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the PRA. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the PRA and the FCA. Details about the extent of its authorisation and regulation by the PRA, and regulation by the FCA are available on request or from www.db.com/en/content/eu_disclosures.html. Deutsche Bank AG, London Branch ("Deutsche Bank"), is acting exclusively for TalkTalk as joint financial adviser, joint Rule 3 adviser and joint corporate broker and for no one else in connection with the Acquisition and the matters described in this Announcement, and Deutsche Bank, will not be responsible to anyone other than TalkTalk for providing the protections afforded to clients of Deutsche Bank, or for providing advice in relation to the Acquisition or any other matters referred to in this Announcement.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated by the FCA in the United Kingdom, is acting exclusively for TalkTalk and for no one else in connection with the Acquisition and will not be responsible to anyone other than TalkTalk for providing the protections afforded to its clients or for providing advice in connection with the Acquisition.  Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this document, any statement contained herein, the Acquisition or otherwise.

Further information

This Announcement is for information purposes only and is not intended to, and does not, constitute or form part of any offer or invitation to purchase, otherwise acquire or subscribe for or dispose of any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise. The Acquisition will be made solely through the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the offer document), which will contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Scheme. Any voting decision or response in relation to the Acquisition should be made solely on the basis of the Scheme Document.

This Announcement does not constitute a prospectus or a prospectus exempt document.

This Announcement has been prepared for the purpose of complying with English law and the Code, and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside England.

Overseas shareholders

The release, publication or distribution of this Announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are not resident in the United Kingdom or who are subject to the laws of any jurisdiction other than the United Kingdom (including Restricted Jurisdictions) should inform themselves about, and observe, any applicable legal or regulatory requirements. In particular, the ability of persons who are not resident in the United Kingdom or who are subject to the laws of any jurisdiction other than the United Kingdom to participate in the Acquisition or to vote their Scheme Shares in respect of the Scheme at the Court Meeting, or to execute and deliver Forms of Proxy appointing another person to vote at the Court Meeting on their behalf, may be affected by the laws of the relevant jurisdictions in which they are located or to which they are subject. Any failure to comply with applicable legal or regulatory requirements of any jurisdiction may constitute a violation of securities laws in that jurisdiction. To the fullest extent permitted by applicable law, the companies, advisers and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

Unless otherwise determined by the Offeror or required by the Code, and permitted by applicable law and regulation, the Acquisition shall not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws or regulations in that jurisdiction and no person may vote in favour of the Acquisition by use of the mails or any other means or instrumentality (including, without limitation, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction or from within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction.

The Acquisition will be subject to the applicable requirements of English law, the Court, the Code, the Panel and the London Stock Exchange.

Copies of this Announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction or any other jurisdiction where to do so would constitute a violation of the laws or regulations of such jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in, into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of, or acceptance of, the Acquisition.

If the Acquisition is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover Offer may not be made, directly or indirectly, in or into, or by use of the mails or any other means or instrumentality (including, without limitation, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction and the Takeover Offer will not be capable of acceptance by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction.

The availability of the Acquisition to TalkTalk Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The availability of the Consideration Shares to persons who are not resident in the United Kingdom may be affected by the laws and/or regulations of the relevant jurisdiction in which they are located. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Consideration Shares have been, nor will they be, registered under or offered in compliance with applicable securities laws of any state, province, territory or jurisdiction of Canada, Australia or Japan. Accordingly, the Consideration Shares are not being and may not be (unless an exemption under relevant securities laws is applicable) offered, sold, resold or delivered, directly or indirectly, in or into or from Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of, or require registration thereof in, such jurisdiction or to, or for the account or benefit of, any Canadian, Australian or Japanese person.

Where the Offeror believes that an election for the Alternative Offer by any Scheme Shareholder may infringe applicable legal or regulatory requirements, or may result in a requirement for a registration under the securities laws of any Restricted Jurisdiction, the Offeror will have the right to deem that such Scheme Shareholder has not validly elected for the Alternative Offer and such Scheme Shareholder will instead receive the Cash Offer in respect of the Scheme Shares which were subject to such an election in accordance with the terms of the Acquisition.

Further details in relation to TalkTalk Shareholders in overseas jurisdictions will be contained in the Scheme Document.

Notice to US investors in TalkTalk

The Acquisition relates to the shares of an English company and is expected to be implemented by means of a scheme of arrangement provided for under the Companies Act. A transaction implemented by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act. The Acquisition is subject to the disclosure requirements and practices applicable to a scheme of arrangement involving a target company in England whose shares are traded on the main market of the London Stock Exchange, which differ from the disclosure requirements of the US tender offer and proxy solicitation rules. The financial information with respect to TalkTalk included in this Announcement and the Scheme Document has been or will have been prepared in accordance with IFRS or generally accepted accounting principles in the UK and may not therefore be comparable to the financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. If, in the future, the Offeror exercises its right to implement the Acquisition by way of a Takeover Offer and determines to extend the Takeover Offer into the US, the Acquisition will be made in compliance with applicable US laws and regulations, including Section 14(e) of the US Exchange Act and Regulation 14E thereunder.

The receipt of cash pursuant to the Scheme by US TalkTalk Shareholders as consideration for the transfer of TalkTalk Shares pursuant to the Scheme may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other, tax laws. Each TalkTalk Shareholder (including US TalkTalk Shareholders) is urged to consult their own independent professional adviser immediately regarding the legal and tax consequences of the Scheme.

Any Consideration Shares to be issued pursuant to the Acquisition have not been and will not be registered under the US Securities Act. Accordingly the Consideration Shares may not be offered, sold or delivered, directly or indirectly, in or into the US except pursuant to exemptions from, or transactions not subject to, the application requirements of such jurisdiction. It is expected that any Consideration Shares to be issued to TalkTalk Shareholders resident, or located, in the US will be issued in reliance upon the exemption from such registration provided by section 3(a)(10) of the US Securities Act.

Neither the SEC nor any US state securities commission has approved or disapproved or passed judgment upon the fairness or the merits of the Acquisition or determined if this Announcement is adequate, accurate or complete. Any representation to the contrary is a criminal offence in the US.

TalkTalk is incorporated under the laws of England. In addition, some or all of its officers and directors reside outside the US, and some or all of its assets are or may be located in jurisdictions outside the US. Therefore, investors may have difficulty effecting service of process within the US upon those persons or recovering against TalkTalk or its officers or directors on judgments of US courts, including judgments based upon the civil liability provisions of US federal securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgment. It may not be possible to sue TalkTalk or its officers or directors in a non-US court for violations of US securities laws.

In accordance with normal United Kingdom practice and pursuant to Rule 14e-5(b) of the US Exchange Act, the Offeror or its nominees or brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, TalkTalk Shares outside the US, other than pursuant to the Acquisition, until the date on which the Acquisition becomes Effective, lapses or is otherwise withdrawn, in compliance with applicable law, including the US Exchange Act. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases will be disclosed as required in the United Kingdom, will be reported via a Regulatory Information Service and will be available on the London Stock Exchange website at: http://www.londonstockexchange.com.

Forward-looking statements

This Announcement contains certain statements which are, or may be deemed to be, "forward-looking statements". These statements are based on the current expectations of the Offeror, Tosca Penta and/or TalkTalk (as the case may be) and are naturally subject to uncertainty and changes in circumstances. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as, without limitation, "anticipate", "target", "expect", "estimate", "intend", "plan", "forecast", "project", "goal", "believe", "aim", "will", "may", "hope", "continue", "would", "could" or "should" or other words of similar meaning or the negative thereof. Forward-looking statements include, but are not limited to, statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial conditions, dividend policy, losses and future prospects, (ii) business and management strategies and the expansion and growth of the operations of TalkTalk or the Offeror, and (iii) the effects of government regulation on the business of TalkTalk or the Offeror. There are many factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among such factors are changes in global, political, economic, business, competitive, market and regulatory forces, circumstances or conditions, future exchange and interest rates, changes in tax rates and future business combinations or disposals. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.

These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Except as expressly provided in this Announcement, neither they nor any other statements have been reviewed by the auditors of the Offeror, Tosca Penta and/or TalkTalk. By their nature, these forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. The factors described in the context of such forward-looking statements in this Announcement may cause the actual results, performance or achievements of any such person, or industry results and developments, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, none of the Offeror, Tosca Penta or TalkTalk can give any assurance that such expectations will prove to have been correct and persons reading this Announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this Announcement. None of the Offeror, Tosca Penta, TalkTalk or their respective members, directors, officers, employees, advisers or any person acting on behalf of one or more of them, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Announcement will actually occur.

Except as required by the FCA, the London Stock Exchange, the Part VI Rules or any other applicable law and/or regulation, none of the Offeror, Tosca Penta, TalkTalk or their respective members, directors, officers, employees, advisers or any person acting on behalf of one or more of them, has any intention or accepts any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. All subsequent oral or written forward-looking statements attributable to the Offeror, Tosca Penta, TalkTalk or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above.

No profit forecasts or estimates or quantified financial benefit statements

Save as set out in this Announcement, no statement in this Announcement is intended as a profit forecast, profit estimate or quantified financial benefit statement for or in respect of the Offeror, Toscafund, Penta or TalkTalk for any period and no statement in this Announcement should be interpreted to mean that cash flow from operations, earnings, or earnings per share or income of those persons (where relevant) for the current or future financial years would necessarily match or exceed the historical published cash flow from operations, earnings, earnings per share or income of those persons (as appropriate).

Publication on websites

A copy of this Announcement and the documents required to be published pursuant to Rule 26.1 and Rule 26.2 of the Code will be made available (subject to certain restrictions relating to persons resident in Restricted Jurisdictions), free of charge, on TalkTalk's website at www.talktalkgroup.com, on Toscafund's website at www.toscafund.com  and on Penta's website at www.pentacapital.com by no later than 12 noon on the Business Day following the date of this Announcement.

Neither the content of these websites nor the content of any other website accessible from hyperlinks on such websites is incorporated into, or forms part of, this Announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Code, a person so entitled may request a copy of this Announcement (and any information incorporated into it by reference to another source) in hard copy form free of charge. A person may also request that all future documents, announcements and information sent to that person in relation to the Acquisition should be in hard copy form. For persons who have received a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent to you unless you have previously notified TalkTalk's registrar, Equiniti Limited, that you wish to receive all documents in hard copy form or unless requested in accordance with the procedure set out below.

If you would like to request a hard copy of this Announcement please contact Dominic Morley, Nick Lovering or Alina Vaskina  at Panmure Gordon (UK) Limited during business hours on + 44 (0) 20 7886 2500 or by submitting a request in writing to any of them at Panmure Gordon (UK) Limited, One New Change, London EC4M 9AF.

Information relating to TalkTalk Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by TalkTalk Shareholders, persons with information rights and other relevant persons for the receipt of communications from TalkTalk may be provided to the Offeror during the Offer Period as required under section 4 of Appendix 4 to the Code.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk , including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

General

If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser duly authorised under FSMA if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

Time

All times referred to in this Announcement are London times, unless otherwise stated.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

THIS ANNOUNCEMENT IS NOT A PROSPECTUS OR A PROSPECTUS EXEMPT DOCUMENT AND TALKTALK SHAREHOLDERS SHOULD NOT MAKE ANY DECISION IN RELATION TO THE CONSIDERATION SHARES EXCEPT ON THE BASIS OF THE INFORMATION TO BE CONTAINED IN THE SCHEME DOCUMENT WHICH IS PROPOSED TO BE PUBLISHED IN DUE COURSE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

 

17 December 2020

RECOMMENDED ACQUISITION

of

TALKTALK TELECOM GROUP PLC

by

TOSCA IOM LIMITED

to be implemented by means of a scheme of arrangement under Part 26 of the Companies Act 2006

 

1.  Introduction

The board of the Offeror and the Independent TalkTalk Directors are pleased to announce that they have reached agreement on the terms of a recommended acquisition by the Offeror of the entire issued and to be issued ordinary share capital of TalkTalk (the "Acquisition").

It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act (the "Scheme"). However, the Offeror reserves the right to elect (with the consent of the Panel) to implement the Acquisition by way of a Takeover Offer.

2.  The Acquisition

Under the terms of the Acquisition, which shall be subject to the Conditions and further terms set out in Appendix 1 and to the full terms and conditions which will be set out in the Scheme Document, Scheme Shareholders will be entitled to receive:

for each Scheme Share    97 pence in cash (the "Cash Offer")

Based on the Offer Price, the terms of the Cash Offer value the entire issued ordinary share capital of TalkTalk at approximately £1,112 million.

The Offer Price represents a premium of approximately:

· 16.4 per cent. to the Closing Price of 83.3 pence for each TalkTalk Share on 7 October 2020 (being the last Business Day before the commencement of the Offer Period);

· 25.8 per cent. to the volume-weighted average price of 77.1 pence for each TalkTalk Share for the three month period ended 7 October 2020; and

· 17.3 per cent. to the volume-weighted average price of 82.7 pence for each TalkTalk Share for the six month period ended 7 October 2020.

As an alternative to the Cash Offer, Scheme Shareholders (other than Scheme Shareholders resident or located in a Restricted Jurisdiction) may elect to receive one unlisted ordinary share in the capital of the Offeror (a "ConsiderationShare") for each Scheme Share held (the "Alternative Offer") subject to the terms and conditions of the Alternative Offer detailed in paragraph 12 of this Announcement below.

The Acquisition will be subject to the Conditions and certain further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document including, among other things: (i) the approval of Scheme Shareholders at the Court Meeting and the passing of the Resolutions at the General Meeting; (ii) the sanction of the Scheme by the Court; and (iii) the Scheme becoming Effective no later than the Long Stop Date. In order to become Effective, the Scheme must be approved by a majority in number of Scheme Shareholders eligible to vote, representing at least 75 per cent. of the voting rights of Scheme Shareholders eligible to vote, in each case present and voting, either in person or by proxy, at the Court Meeting and at any separate class meeting which may be required by the Court or at any adjournment of such meeting.

If any dividend or other distribution is announced, declared, made, payable or paid in respect of the TalkTalk Shares on or after the date of this Announcement and prior to the Effective Date, the Offeror reserves the right to reduce the consideration payable in respect of each TalkTalk Share under the terms of the Acquisition by the amount of all or part of any such dividend or other distribution. If the Offeror exercises this right or makes such a reduction in respect of a dividend or other distribution, TalkTalk Shareholders will be entitled to receive and retain that dividend or other distribution.

The Scheme Shares will be acquired by the Offeror fully paid and free from all liens, equitable interests, charges, encumbrances, rights of pre-emption and any other third party rights or interests whatsoever and together with all rights existing at the date of this Announcement or thereafter attaching thereto, including (without limitation) voting rights and the right to receive and retain, in full, all dividends and other distributions (if any) declared, made or paid or any other return of capital (whether by way of reduction of share capital or share premium account or otherwise) made on or after the date of this Announcement, other than any dividend or distribution in respect of which the Offeror exercises its right under the terms of the Acquisition to reduce the consideration payable in respect of each TalkTalk Share.

Full details of the Scheme will be included in the Scheme Document, together with notices of the Court Meeting and the General Meeting. Subject to the Scheme Document being sent to TalkTalk Shareholders as soon as reasonably practicable following the Court granting permission to convene the Court Meeting (and subject to the availability of the Court in such respect), the Panel has consented to a posting date later than 28 days following the date of this Announcement. The Court is expected to grant such permission at a hearing on 3 February 2021.

Subject to the satisfaction or waiver of the Conditions, it is expected that the Scheme will become Effective in the first quarter of 2021.

3.  Background to and reasons for the Acquisition

Funds managed by Toscafund have been investors in TalkTalk since 2016 and Toscafund has been supportive of the organisation and its leadership since that time. Tosca Penta values the culture and ambition of TalkTalk and the efficient manner in which it has delivered its business plan in recent times, providing value for money connectivity services to consumers and businesses throughout the UK. In the opinion of Tosca Penta, the management of TalkTalk have taken significant steps to rationalise operations and strengthen its balance sheet, most notably through the relocation of the head office from London to Salford in 2019, raising £575 million through a corporate bond offering in February 2020 and the sale of TalkTalk's fibre assets in March 2020.

Tosca Penta believes that TalkTalk has demonstrated resilient performance during 2020 and notes the material decrease in its share price over the last 12 months. Tosca Penta has, therefore, concluded that operating in the public listed markets is not optimal for TalkTalk and that the next stages of such investment, strategy and long term growth can all be best delivered as a private company, without the significant governance, cost, regulatory and financial reporting burdens of a company listed on the London Stock Exchange. Tosca Penta further believes that TalkTalk will benefit from access to different forms of equity and debt financing structures that are not readily available to listed companies.

Tosca Penta believes that there is an opportunity to invest in TalkTalk to develop further its existing strong brand as the UK's leading value for money provider of fixed fibre connectivity. Following the Acquisition, investment will be made in developing simple customer offers in full fibre products as 'Fibre-to-the-Premises' ("FTTP") rolls out at scale, via multiple network operators, across the UK. Further investment will be made to reposition TalkTalk's brand and to build the systems and capabilities required to provide wholesale telecoms services to multiple potential new and existing customers. In addition, Tosca Penta hopes to facilitate the acceleration of the existing management team's plan to grow market share in both residential and business telecoms markets in the UK, by leveraging TalkTalk's national scale wholesale platform and its position as an aggregator of 'over-the-top' ("OTT") video content from the likes of Amazon Prime Video and Netflix.

4.  Recommendation

The Independent TalkTalk Directors, who have been so advised by Barclays and Deutsche Bank as to the financial terms of the Cash Offer, each consider the terms of the Cash Offer to be fair and reasonable. In providing their advice to the Independent TalkTalk Directors, Barclays and Deutsche Bank have each taken into account the commercial assessments of the TalkTalk Directors, including the Independent TalkTalk Directors. Barclays and Deutsche Bank are each providing independent financial advice to the Independent TalkTalk Directors for the purposes of Rule 3 of the Code.

Accordingly, the Independent TalkTalk Directors intend to recommend unanimously that the Scheme Shareholders who are entitled to vote at the Court Meeting vote (or procure the vote) in favour of the Scheme at the Court Meeting and TalkTalk Shareholders entitled to vote at the General Meeting vote (or procure the vote) in favour of the Resolutions to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), as the Independent TalkTalk Directors who are interested in TalkTalk Shares have irrevocably undertaken to do in respect of their own beneficial holdings of, in aggregate, 707,200 TalkTalk Shares representing, in aggregate, approximately 0.062 per cent. of the issued ordinary share capital of TalkTalk on the Latest Practicable Date, as more fully described in Appendix 3 to this Announcement.

The Non-independent TalkTalk Directors have not participated in the decision to make the recommendation referred to above as they have either irrevocably undertaken to elect for the Alternative Offer in respect of all of their holdings of TalkTalk Shares and/or are expected to be appointed to the board of directors of the Offeror following the Acquisition becoming Effective.

The Independent TalkTalk Directors consider that, in deciding whether or not to elect for the Alternative Offer, the Scheme Shareholders should take their own independent advice and consider carefully the disadvantages and advantages of electing for the Alternative Offer (including, but not limited to, those set out below) in light of their own financial circumstances and investment objectives.

Disadvantages of electing for the Alternative Offer

· The Consideration Shares will be unlisted and will not be admitted to trading on any stock exchange and will, therefore, be illiquid. As a result, any assessment of the value of the Consideration Shares should take into account an individual shareholder's assessment of an appropriate liquidity discount.

· The Consideration Shares will be of uncertain value and there can be no assurance that they will be capable of being sold in the future.

· TalkTalk is currently listed on the premium listing segment of the Official List of the FCA and traded on the London Stock Exchange's main market for listed securities. Certain standards and protections afforded to shareholders in a premium listed company will be substantially different to a shareholding in an unlisted private company which a Scheme Shareholder would receive as a result of electing for the Alternative Offer.

Advantages of electing for the Alternative Offer

· The Alternative Offer allows Scheme Shareholders to invest directly in the Offeror, providing continued economic exposure to TalkTalk under private ownership.

· From completion of the Acquisition, the Consideration Shares will rank economically pari passu with the Offeror Ordinary Shares in issue at the time the Consideration Shares are allotted and issued, including the right to receive and retain certain dividends and other distributions declared, made or paid by reference to a record date falling after the Effective Date.

The Independent TalkTalk Directors, Barclays and Deutsche Bank have considered the disadvantages and advantages outlined above in relation to the Alternative Offer.

Barclays and Deutsche Bank are unable to advise the Independent TalkTalk Directors as to whether or not the financial terms of the Alternative Offer are fair and reasonable. This is because of the significant and variable impact the disadvantages and advantages of the Alternative Offer may have to individual Scheme Shareholders.

Accordingly, the Independent TalkTalk Directors cannot form an opinion as to whether or not the terms of the Alternative Offer are fair and reasonable and are not making any recommendation to Scheme Shareholders as to whether or not they should elect for the Alternative Offer. Scheme Shareholders are encouraged to take into account the disadvantages and advantages highlighted above, as well as their individual circumstances, when deciding whether or not to elect for the Alternative Offer in respect of all or part of their holding of Scheme Shares.

Scheme Shareholders should also ascertain whether acquiring or holding Consideration Shares is affected by the laws of the relevant jurisdiction in which they reside and consider whether Consideration Shares are a suitable investment in light of their own personal circumstances. Scheme Shareholders are, therefore, strongly recommended to seek their own independent financial, tax and legal advice in light of their own particular circumstances and investment objectives before deciding whether to elect for the Alternative Offer (whether in respect of part of their holding of Scheme Shares or otherwise). Any decision to elect for the Alternative Offer should be based on independent financial, tax and legal advice and, to the extent available in such Scheme Shareholder's jurisdiction, consideration of the Scheme Document (once published).

5.  Background to and reasons for the Independent TalkTalk Directors' recommendation of the Cash Offer

TalkTalk is the UK's leading value-for-money provider of fixed line connectivity services for residential and business customers. TalkTalk provides landline telephony, broadband and TV to over four million customers in the UK, supplying consumers through the TalkTalk brand and businesses through TalkTalk Business and providing wholesale arrangements to resellers. TalkTalk's business model is underpinned by a low-cost position, driven primarily by a scalable and extensive network, which acts as a barrier to entry to competitors and has historically enabled the introduction of disruptive products at affordable prices.

Over recent years, the demand for affordable and reliable fixed connectivity has increased with a fast broadband connection now often referred to as the 'fourth utility' on a par with water, electricity and gas. This is a trend that has only accelerated recently as the COVID-19 pandemic has led to significantly increased data usage for working from home, OTT video streaming and online shopping.

The UK telecoms market has commenced a significant, multi-year investment in the roll-out of FTTP in recent years. This technological advancement has the potential to meaningfully change TalkTalk's performance, given its ability to meet both residential and business customers' demand for fast, reliable connectivity and enhance TalkTalk's differentiated market position as a both a retailer and wholesaler of high speed, fixed-line connectivity.

In 2017, TalkTalk set out a strategy to simplify and refocus its business in order to take advantage of these sector dynamics through a reduction in costs and a focus on accelerating the roll-out of FTTP. Significant progress has been made in delivering against this strategy, including exiting mobile virtual network operations, rationalising TalkTalk's TV offering, moving TalkTalk's headquarters to sit with the business and technology teams in one campus in Salford and launching a "Fibre for Everyone" programme which shifted TalkTalk's focus away from asymmetric digital subscriber line technology onto faster and more profitable "Fibre-to-the-Cabinet" ("FTTC") and FTTP products. Furthermore, TalkTalk has moved away from owning FTTP assets through the sale of its Fibre Assets Business (the fibre network roll-out operations which were operated by the TalkTalk Group (including FibreNation Ltd and Bolt Pro Tem Ltd)) in March 2020 to CityFibre Infrastructure Holdings Limited ("CityFibre"), opting instead to partner with CityFibre and other network providers through long-term, competitive wholesale agreements.

Despite improvements in TalkTalk's operating performance in recent years, including continued momentum in the take up of TalkTalk's fibre products and maintaining consistently low levels of churn, TalkTalk's share price has not fully reflected these positive improvements. The TalkTalk Directors (including the Independent TalkTalk Directors) believe that the reasons for this underperformance include:

• cash resources being invested in acquiring new customers and in exiting onerous and costly third party agreements as TalkTalk simplifies its business;

• challenges in accurately forecasting TalkTalk's financial performance for any given financial year, which has previously led to financial results missing original full year guidance provided by TalkTalk to the market;

• resulting constraints on TalkTalk's ability to deleverage towards its medium-term target ratio of 2.0x net debt to headline earnings before interest, tax, depreciation and amortisation;

•   uncertainty around the timeframe for the roll-out of FTTP and the impact of competition on   TalkTalk's profitability; and

• the marketability and liquidity of TalkTalk's shares, which has been constrained by a limited share ownership amongst active institutional investors.

To be able to fully capture the FTTP opportunity and accelerate the delivery of its strategic objective to become the UK's leading value-for-money fixed line fibre connectivity provider, TalkTalk will need significant capital investment in systems, capabilities, marketing and customer service over the next 3-5 years, which will likely place increased demands on its balance sheet and impact medium-term profitability, including distributions to TalkTalk Shareholders.

Toscafund has been a committed and supportive shareholder of TalkTalk for over three years and now manages funds holding, in aggregate, approximately 29.5 per cent. of the existing issued share capital of TalkTalk. Toscafund has indicated a willingness to continue supporting TalkTalk and provide the necessary and significant investment required for TalkTalk to be able to successfully execute its strategy. With its long-term investment horizon, expertise and breadth of access to capital, the Independent TalkTalk Directors believe that Toscafund would provide TalkTalk with the necessary support to achieve its strategic objectives of becoming the UK's leading value provider of core fixed fibre connectivity. 

The Independent TalkTalk Directors have also taken into account the interests of all of TalkTalk's stakeholders in coming to their decision to recommend the Cash Offer to TalkTalk Shareholders. In particular, the Independent TalkTalk Directors note the Offeror's confirmation that it has no intention for any individual's employment to be adversely impacted by the Acquisition and that it will be building upon the existing teams already in place in the business. The Independent TalkTalk Directors also understand that there are no current plans for the Offeror to change the locations of TalkTalk's material places of business, nor is there an intention to redeploy the fixed assets of TalkTalk.

Set against the backdrop of the risks associated with the transition to FTTP and the significant investment required to achieve TalkTalk's strategic objectives, the Independent TalkTalk Directors recognise that the value which may ultimately be delivered through the Alternative Offer is inherently uncertain, whilst the Cash Offer provides Scheme Shareholders with the certainty of a guaranteed cash value.

In considering the merits of the Cash Offer, the Independent TalkTalk Directors have taken into account that the Offer Price of 97 pence represents a premium of approximately:

• 16.4 per cent. to the Closing Price of 83.3 pence per TalkTalk Share on 7 October 2020, the   Last Practicable Date prior to the announcement that TalkTalk had received a non-binding   proposal from Toscafund on 8 October 2020;

• 25.8 per cent. to the three month volume-weighted average price of 77.1 pence per TalkTalk Share on 7 October 2020; and

• 17.3 per cent. to the six month volume-weighted average price of 82.7 pence per TalkTalk Share on 7 October 2020.

Accordingly, following careful consideration of the above factors, the Independent TalkTalk Directors intend to unanimously and unconditionally recommend the Cash Offer to Scheme Shareholders. Additionally, the Independent TalkTalk Directors note that the terms of the Acquisition also provide Scheme Shareholders with the opportunity to continue their investment in TalkTalk through an election for the Alternative Offer. Scheme Shareholders may wish to refer to further details in relation to the Alternative Offer set out in this Announcement.

6.  Irrevocable undertakings

Pursuant to the irrevocable undertakings received from the Independent TalkTalk Directors referred to above, each of the Independent TalkTalk Directors who is interested in TalkTalk Shares has irrevocably undertaken to vote (or procure the vote) in favour of the Scheme at the Court Meeting and in favour of the Resolutions to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer) in respect of their entire beneficial holding of Scheme Shares but has not irrevocably undertaken to elect for the Alternative Offer.

In addition to the irrevocable undertakings received from the Independent TalkTalk Directors referred to above, the Offeror has received irrevocable undertakings from Sir Charles Dunstone, Roger Taylor, Tristia Harrison, John Gildersleeve and Timothy Morris (the "Rollover Management Shareholders") to: (a) be bound by the terms of the Scheme and to vote (or to procure the voting) in favour of the Scheme at the Court Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer); and (b) elect for the Alternative Offer (subject to the terms and conditions of the Alternative Offer set out in paragraph 12 of this Announcement), in each case in respect of their entire beneficial holding of Scheme Shares. In aggregate, this represents 360,283,023 TalkTalk Shares, being all of the TalkTalk Shares currently beneficially held by such individuals, and approximately 44.60  per cent. of the TalkTalk Shares eligible to vote at the Court Meeting as at the Latest Practicable Date.

On behalf of the Tosca Investors, Toscafund has irrevocably undertaken to be bound by the terms of the Scheme and to elect for the Alternative Offer in respect of part of the holdings of Scheme Shares to which the Tosca Investors are beneficially entitled (subject to the terms and conditions of the Alternative Offer set out in paragraph 12 of this Announcement).

In aggregate, therefore, the Offeror has received irrevocable undertakings to vote in favour of:

· the Scheme at the Court Meeting in respect of 360,990,223 TalkTalk Shares, representing approximately 31.49 per cent. of the issued ordinary share capital of TalkTalk and approximately 44.68 per cent. of the Scheme Shares eligible to vote at the Court Meeting, in each case on the Latest Practicable Date; and

· the Resolutions at the General Meeting in respect of 360,990,223 TalkTalk Shares, representing approximately 31.49 per cent. of the issued ordinary share capital of TalkTalk on the Latest Practicable Date.

The irrevocable undertakings received from the Independent TalkTalk Directors who are interested in TalkTalk Shares and the Rollover Management Shareholders will lapse and cease to be binding if, inter alia, a competing offer from a third party for the entire issued and to be issued share capital of TalkTalk is announced, pursuant to Rule 2.7 of the Code, at a price per TalkTalk Share which is (or is equivalent to) at least 115 pence per TalkTalk Share. Further details of these irrevocable undertakings are set out in Appendix 3 to this Announcement.

7.  Information relating to TalkTalk

TalkTalk is the UK's leading value-for-money connectivity provider, supplying landline, broadband, TV and mobile services to over four million customers. TalkTalk's fixed-line unbundled network currently covers approximately 96 per cent. of UK homes. The only comparable fixed-line unbundled network is operated by Sky and covers over 90 per cent. of UK homes. The network provides services to consumers through the TalkTalk brand, to businesses through TalkTalk Business and by wholesaling to resellers. Since entering the market in the early 2000s, TalkTalk has a proud history as an innovative challenger brand, and is committed to providing simple, affordable, reliable and fair connectivity to everyone.

On 21 July 2020, TalkTalk announced a trading update for the three months ended 30 June 2020 (the "Q1-21 Update"). The Q1-21 Update included the following statement on the outlook (the "Outlook Statement") for the TalkTalk Group for the current financial year ending 31 March 2021:

"As the UK's internet usage continues to soar, our role as the UK's only scale affordable provider of Fibre broadband has become even more important. Given this, we see a positive outlook to H1 and are confident in our full year plan to deliver stable to growing Headline EBITDA with strong cash conversion."

On 17 December 2020, TalkTalk announced the preliminary results of the TalkTalk Group for the six months ended 30 September 2020 (the "H1-21 Results").  The H1-21 Results included the following statement on the outlook for the TalkTalk Group for the current financial year ending 31 March 2021:

"As highlighted in this announcement, COVID-19 has had some impact on the TalkTalk Group. Given the ongoing uncertainty created by COVID-19, we will be withdrawing the current full year EBITDA guidance and we will not be providing updated formal guidance."

The Outlook Statement was originally published before the start of the offer period in relation to the Acquisition and, therefore, under Note 2(a) to Rule 28.1 of the City Code the requirements of Rule 28.1(c)(ii) apply in relation to the Outlook Statement.

Accordingly, the TalkTalk Directors confirm that the Outlook Statement of "stable to growing Headline EBITDA" for the current financial year ending 31 March 2021, is no longer valid due to the ongoing uncertainty created by COVID-19.

8.  Information relating to the Offeror Group

The Offeror is a private limited company which was incorporated in England and Wales on 24 September 2020 under the Companies Act with registered number 12903683. It has a registered office at Level 13, Broadgate Tower, 20 Primrose Street, London EC2A 2EW. As at the date of this Announcement, the Offeror has two wholly owned subsidiaries, Midco and Finco.

The directors of the Offeror are Martin Hughes, Torquil Macnaughton and Steven Scott and the sole shareholder of the Offeror is currently Penta Investments GP Limited. In the event that the Scheme becomes Effective, it is expected that the board of directors of the Offeror will comprise Martin Hughes, Torquil Macnaughton and Steven Scott (each as an appointee of Tosca Penta), Sir Charles Dunstone, John Gildersleeve and Roger Taylor (each as an appointee of Sir Charles Dunstone), Tristia Harrison (as Chief Executive Officer), Phil Eayres (as Chief Financial Officer designate) and Paul Reynolds (as an independent non-executive director).

Each of the Offeror, Midco and Finco is a newly incorporated company, formed at the direction of Tosca Penta for the purpose of implementing the Acquisition. Please refer to Appendix 4 to this Announcement for further information in respect of the Offeror Group.

The principal activity of the Offeror, in the event the Scheme becomes Effective, will be to act as the ultimate holding company for TalkTalk and to provide certain management and strategic services to the TalkTalk Group. The Offeror's principal investment will be TalkTalk Shares acquired pursuant to the Acquisition.

Save for activities in connection with the making, implementation and financing of the Acquisition, the Offeror has not carried on any business prior to the date of this Announcement, nor has it entered into any obligations. The Offeror has not paid any dividends or prepared any historical financial accounts. In the event that the Scheme becomes effective, the TalkTalk Group will represent all or substantially all of the earnings, assets and liabilities of the Offeror, save for the liabilities incurred in connection with the Acquisition.

In the event that the Scheme becomes Effective, the Offeror and Tosca Penta expect that the New Tosca Penta Funds, certain TalkTalk Shareholders who elect for the Alternative Offer (including the Tosca Investors (the Tosca Investors and the New Tosca Penta Funds together, the "Investors")) and the Rollover Management Shareholders will enter into the Shareholders' Agreement. Pursuant to the terms of the Shareholders' Agreement, to which the Offeror will also be a party, the parties thereto will agree to regulate their relationship in accordance with the terms of such agreement and the articles of association of the Offeror. The Shareholders' Agreement contains certain obligations and restrictions on the Investors and the Rollover Management Shareholders. It also confers on the Investors certain rights, including the right to receive and approve the annual business plan of the Offeror and to disclose certain information to specified connected parties. Scheme Shareholders who elect for the Alternative Offer but who are not Investors or Rollover Management Shareholders will not be required to adhere to the terms of the Shareholders' Agreement and will not benefit from the rights, or be subject to the restrictions, set out in the Shareholders' Agreement. 

9.  Information relating to Toscafund, Penta, the Tosca Investors and the New Tosca Penta Funds

Toscafund

Toscafund is part of the Old Oak Group, a financial services group based in London, which is engaged in asset management and private equity activities. It was founded in 2000 by Martin Hughes, its Chief Executive. The holding company for Old Oak Group is Old Oak Holdings Limited, a company established and owned by Martin Hughes. As at 30 September 2020, the Old Oak Group had combined assets under management of approximately US$3.5 billion.

Toscafund's primary activity is to act as an investment manager/adviser to a number of investment funds and accounts that follow primarily equity investment strategies. It was incorporated in England and Wales on 13 June 2006 and has been authorised by the FCA to conduct investment business since 31 October 2006. It is also registered as an investment adviser with the SEC. Its principal place of business is at Ferguson House, 15 Marylebone Road, London NW1 5JD.

Toscafund acts as the investment manager to the Tosca Investors, which are the beneficial owners of 338,409,955 TalkTalk Shares, and Toscafund has irrevocably undertaken, on behalf of the Tosca Investors, to take up the Alternative Offer in respect of at least 273,195,877 TalkTalk Shares (provided that the minimum number of TalkTalk Shares subject to such irrevocable undertaking shall be reduced by whichever is the lesser of: (i) 64,948,454 TalkTalk Shares; and (ii) such number of TalkTalk Shares which are the subject of valid elections for the Alternative Offer which have been received (and not withdrawn) as at the time which is immediately after the last date for withdrawal of such elections but not including TalkTalk Shares which are the subject of elections from the Rollover Management Shareholders, such that the number of TalkTalk Shares in respect of which Toscafund will elect to take the Alternative Offer shall not be less than 208,247,423).

The Scheme becoming Effective will have no effect on the earnings and assets and liabilities of Toscafund.

Penta

Penta is an active private equity investor in UK mid-market companies, which is authorised by the FCA to conduct investment business.

Penta was established in 1999 and is majority owned by its partners. Old Oak Holdings Limited, the ultimate parent company of Toscafund, acquired an interest of approximately 39 per cent. in Penta in November 2007, as part of its strategy to establish a broad-based asset management group and, since then, Penta has operated as the private equity arm of Toscafund. In addition to Toscafund's ownership interest, Penta is able to draw on resources from Toscafund to assist it with transaction origination and aspects of its investment process and analysis. Toscafund also provides cornerstone funding for, and introductions to potential investors in, private equity funds raised by Penta.

Since November 2007, Penta has completed 19 transactions, investing approximately £700 million, and it has exited from 11 of those investments realising proceeds in excess of £1 billion.  

As at 30 September 2020, Penta has assets under management of approximately £300 million across a portfolio of eight investments. This portfolio does not include any business which operates in the same industry as the TalkTalk Group.

New Tosca Penta Funds

The New Tosca Penta Funds comprise Tosca Penta Jersey Fund and Tosca Penta LP Fund. Tosca Penta Jersey Fund is a private limited company incorporated in Jersey and Tosca Penta LP Fund is a Scottish limited partnership.

The New Tosca Penta Funds have been established by Penta to fund part of the consideration payable in connection with the Acquisition by subscribing in cash for new Offeror Ordinary Shares and Tosca Penta will use reasonable endeavours to procure commitments to the New Tosca Penta Funds. On or around the time at which the Scheme becomes Effective, the New Tosca Penta Funds will subscribe for new Offeror Ordinary Shares pursuant to the terms of the Subscription Agreement.

Penta will be appointed to manage or advise each of the New Tosca Penta Funds. Penta has arranged the finance to fund the consideration payable in connection with the Acquisition and is the investment manager of the New Tosca Penta Funds. This is in the ordinary course of business for Penta. Penta will receive an arrangement fee from the Offeror of up to £2,000,000. The funding of the Acquisition will increase the funds under Penta's management and consequently the fees and income arising from such funds under management. Other than the entitlement to receive the arrangement fee and ongoing management fees, the Scheme becoming Effective will not have any effect on the earnings, assets or liabilities of Penta.

10.  Strategic plans and intentions with regard to the business, employees and pension schemes of the TalkTalk Group

Strategic plans and business and employees of the TalkTalk Group

The Offeror attaches great importance to the skills and experience of the existing management and employees of TalkTalk and believes that they will be a key factor in maximising the success of TalkTalk following the Scheme becoming Effective. The Offeror does not envisage making any significant changes in relation to the continued employment of the TalkTalk Group's employees and management, including the conditions of such employment, save that the Independent TalkTalk Directors have confirmed that they will step down upon the Scheme becoming Effective (or, in the event that the Acquisition is implemented by way of a Takeover Offer, upon or shortly following the Takeover Offer becoming or being declared wholly unconditional) and that a limited number of ancillary PLC-related functions are expected to be discontinued upon TalkTalk ceasing to operate as a publicly listed company. The Offeror confirms that it has no intentions for any individual's employment to be adversely impacted by this change. In the event that any individuals do need to be redeployed following TalkTalk ceasing to be a publicly listed company, the Offeror confirms they will be treated in a manner consistent with the TalkTalk Group's policies and practices.

Save as set out above in respect of a limited number of PLC-related functions, the Offeror does not expect any material change in the balance of skills and functions of employees and management of TalkTalk.

Management incentivisation arrangements

No proposals have been made on the terms of any incentive arrangements for relevant managers or the continuing TalkTalk Directors and no discussions in respect of the terms of these arrangements will take place during the Offer Period.

Existing rights and pension schemes

The Offeror confirms that, following the Scheme becoming Effective, the existing contractual and statutory employment rights, including in relation to pensions, of all TalkTalk employees and management will be fully safeguarded in accordance with applicable law. The Offeror does not intend to make any material changes to the conditions of employment.

TalkTalk makes available to certain employees a defined contribution pension scheme and auto enrolment scheme in accordance with its legal obligations, but does not itself offer any group defined benefit pension scheme. The Offeror does not intend to make any changes to the current employer pension contribution arrangements, the accrual of benefits for existing members or the rights of admission of new members.

Research and development functions

The Offeror has no intention of changing TalkTalk's research and development functions.

Headquarters, fixed assets and places of business

The Offeror has no intention to redeploy the headquarters or fixed assets of TalkTalk. Further, the Offeror has no intention of altering the location of the TalkTalk Group's places of business (including the location of TalkTalk's headquarters and headquarter functions).

Listing and trading facilities

TalkTalk Shares are currently listed on the premium listing segment of the Official List and admitted to trading on the main market for listed securities of the London Stock Exchange. As set out in paragraph 18 below, an application will be made to each of the London Stock Exchange and the FCA to cancel trading in TalkTalk Shares on the London Stock Exchange's main market and to remove the listing of the TalkTalk Shares from the Official List respectively with effect from or shortly after the Effective Date.

The TalkTalk Board has given due consideration to Offeror's stated intention and assurances noted above in deciding to recommend the Acquisition.

No statements in this paragraph 10 are "post-offer undertakings" for the purposes of Rule 19.5 of the Code.

11.  TalkTalk Share Plans

The Scheme will extend to any TalkTalk Shares unconditionally allotted, issued or transferred before the Scheme Record Time to satisfy the exercise of options or awards granted under the TalkTalk Share Plans.

Appropriate proposals will be made in due course to participants in the TalkTalk Share Plans. The proposals will explain the effect of the Acquisition on the participants' options or awards and the actions they may take in respect of their options or awards.

The Scheme will not extend to TalkTalk Shares issued after the Scheme Record Time. However, it is proposed to amend TalkTalk's articles of association at the General Meeting to provide that, following completion of the Acquisition, any TalkTalk Shares issued to any person other than the Offeror or its nominees after the Scheme Record Time (including in satisfaction of the exercise of an option or award under the TalkTalk Share Plans) will be automatically transferred to the Offeror in consideration for the payment by the Offeror to such person of an amount equal to 97 pence for each TalkTalk Share so transferred.

12.  Alternative Offer

Under the Alternative Offer, Scheme Shareholders (other than Scheme Shareholders resident or located in a Restricted Jurisdiction) may elect, in respect of all or part of their Scheme Shares, to receive one Consideration Share for each Scheme Share subject to the election in lieu of the Cash Offer to which they are otherwise entitled.  

The Alternative Offer is not being offered, sold or delivered, directly or indirectly, in or into any Restricted Jurisdiction. Further details in relation to Scheme Shareholders resident, or located, in overseas jurisdictions will be contained in the Scheme Document.

Upon the Scheme becoming Effective, Scheme Shareholders who have not validly elected for the Alternative Offer in respect of all or part of their holding of Scheme Shares will automatically receive the Cash Offer in respect of their entire holding of Scheme Shares.

The issue of Consideration Shares pursuant to the Alternative Offer will be subject to the Conditions and further terms set out in Appendix 1 to this Announcement and further details of the Alternative Offer, the Offeror Group and the rights attaching to the Consideration Shares are set out in Appendix 4.

The Consideration Shares will be allotted and issued credited as fully paid and will rank pari passu in all respects with the Offeror Ordinary Shares in issue at the time the Consideration Shares are allotted and issued, including the right to receive and retain dividends and other distributions declared, made or paid by reference to a record date falling after the Effective Date.

For the purposes of Rule 24.11 of the Code, Panmure Gordon will provide an estimate of the value of a Consideration Share, together with the assumptions, qualifications and caveats forming the basis of its estimate of value, in a letter to be set out in the Scheme Document.

13.  Financing of the Acquisition

The cash consideration payable by the Offeror pursuant to the Acquisition will be financed by up to £527 million of debt to be provided under the PIK Facility Agreement.

Panmure Gordon, in its capacity as financial adviser to the Offeror, is satisfied that sufficient financial resources are available to the Offeror to enable it to satisfy in full the cash consideration payable to TalkTalk Shareholders under the terms of the Acquisition.

Further details of the financing of the Acquisition will be set out in the Scheme Document.

14.  Offer-related arrangements

Confidentiality Agreements

On 18 August 2020, Penta and TalkTalk entered into a confidentiality agreement (the "Penta Confidentiality Agreement") (as amended on 9 November 2020) pursuant to which Penta has undertaken to keep confidential information relating to TalkTalk and not to disclose such information to third parties (other than permitted recipients (including Toscafund)) unless required by applicable law or regulation. These confidentiality obligations remain in force for a period of 18 months after the date of the Penta Confidentiality Agreement (unless terminated earlier as a result of the Scheme becoming Effective or, in the event that the Acquisition is implemented by way of a Takeover Offer, the Takeover Offer becoming unconditional in all respects in accordance with its terms).

On 9 November 2020, Toscafund and TalkTalk entered into a confidentiality agreement on terms substantially similar to those set out in the Penta Confidentiality Agreement.

Co-operation Agreement

On 17 December 2020, the Offeror and TalkTalk entered into a co-operation agreement (the "Co-operation Agreement") pursuant to which the Offeror and TalkTalk have each agreed, amongst other matters, to co-operate in relation to obtaining, and making filings in respect of, any consents, clearances, permissions, waivers and/or approvals as may be necessary from or under the law, regulations or practices applied by any applicable regulatory authority in connection with the Acquisition. In addition, the Offeror has agreed to provide TalkTalk with such information, assistance and access as it may reasonably require in connection with the preparation of the Scheme Document and has also agreed certain provisions if the Acquisition is implemented by way of a Takeover Offer. The Co-operation Agreement will terminate in certain circumstances including:

(a)  if the Acquisition is withdrawn or lapses;

(b)  if the Independent TalkTalk Directors withdraw their recommendation of the Cash Offer or a competing offer completes, becomes effective or is declared unconditional; or

(c)  if, prior to the Long Stop Date, any Condition is invoked by the Offeror or if the Scheme does not become Effective by the Long Stop Date (or as otherwise agreed between the Offeror and TalkTalk).

Pursuant to the terms of the Co-operation Agreement, the Offeror has also undertaken to notify TalkTalk, no later than the second Business Day prior to the Court Hearing, that either: (a) each of the Conditions (other than the Conditions set out at paragraphs 1 and 2 of Part A of Appendix 1) has been satisfied or waived; or (b) to the extent permitted by the Panel, it intends to invoke or treat as unsatisfied or incapable of satisfaction one or more of the Conditions.

15.  Structure of and conditions to the Acquisition

It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement between TalkTalk and Scheme Shareholders under Part 26 of the Companies Act (although the Offeror reserves the right to implement the Acquisition by way of a Takeover Offer, subject to the consent of the Panel). The Scheme is an arrangement between TalkTalk and the Scheme Shareholders and is subject to the sanction of the Court.

The purpose of the Scheme is to provide for the Offeror to become the holder of the entire issued and to be issued ordinary share capital of TalkTalk, in consideration for which Scheme Shareholders will receive cash consideration or, if a Scheme Shareholder makes an election under the Alternative Offer, Consideration Shares on the basis set out at paragraph 2 of this Announcement. This involves, among other things, an application by TalkTalk to the Court to sanction the Scheme.

As a result of Toscafund's connection with the Offeror, the Scheme Shares beneficially held by the Tosca Investors are not able to be voted at the Court Meeting. Such Scheme Shares are, however, subject to the Scheme and the Tosca Investors will undertake to be bound by its terms.

Conditions to the Acquisition

The Scheme is subject to the Conditions and certain further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document, and will become Effective only if, among other things, the following events occur on or before the Long Stop Date:

(a)  the approval of the Scheme by a majority in number of Scheme Shareholders eligible to vote, representing at least 75 per cent. of the voting rights of the Scheme Shareholders eligible to vote, in each case present and voting, either in person or by proxy, at the Court Meeting;

(b)  the Resolutions being duly passed at the General Meeting;

(c)  the sanction of the Scheme by the Court (with or without modification but subject to any modification being on terms acceptable to TalkTalk and the Offeror); and

(d)  all other Conditions to the Scheme being satisfied or (where applicable) waived.

The Acquisition will lapse if:

(a)  the Court Meeting and the General Meeting are not held by the 22nd day after the expected date of such meetings as set out in the Scheme Document in due course (or such later date as may be agreed between the Offeror and TalkTalk and, in the case of the Court Meeting, as the Court may allow);

(b)  the Court Hearing is not held by the 22nd day after the expected date of such hearing as set out in the Scheme Document (or such later date as may be agreed between the Offeror and TalkTalk and as the Court may allow); or

(c)  the Scheme does not become Effective by the Long Stop Date.

Upon the Scheme becoming Effective: (a) it will be binding on all Scheme Shareholders, irrespective of whether or not they attended or voted at the Court Meeting or the General Meeting (and, if they attended and voted, whether or not they voted in favour); and (b) share certificates in respect of Scheme Shares will cease to be of value and should be destroyed and entitlements to Scheme Shares held within the CREST system will be cancelled. The cash consideration payable under the Scheme will be despatched to Scheme Shareholders who have not elected for the Alternative Offer by the Offeror no later than 14 days after the Effective Date and share certificates in respect of the relevant number of Consideration Shares will be despatched to Scheme Shareholders who have elected for the Alternative Offer (whether in respect of all or part of their shareholding) by the Offeror no later than 14 days after the Effective Date.

Full details of the Scheme will be included in the Scheme Document, together with notices of the Court Meeting and the General Meeting. Subject to the Scheme Document being sent to Scheme Shareholders as soon as reasonably practicable following the Court granting permission to convene the Court Meeting (and subject to the availability of the Court in such respect), the Panel has consented to a posting date later than 28 days following the date of this Announcement. The Scheme Document and Forms of Proxy will be made available to all Scheme Shareholders free of charge. Subject to the satisfaction or waiver of the Conditions, it is expected that the Scheme will become Effective in the first quarter of 2021.

The Scheme will be governed by English law and will be subject to the jurisdiction of the Court. The Scheme will also be subject to the applicable requirements of the Code, the Panel, the FCA and the London Stock Exchange.

There are no agreements or arrangements to which the Offeror is a party which relate to the circumstances in which it may or may not invoke or seek to invoke a Condition of the Acquisition.

16.  Scheme timetable/further information

A full anticipated timetable will be set out in the Scheme Document which will be published and posted as soon as practicable after the Court Hearing to be held on 3 February 2021 at which it is expected that the Court will approve the Scheme Document for publication and posting. The Panel has consented to the Scheme Document being posted later than 28 days following the date of this Announcement. Subject to certain restrictions relating to persons resident in Restricted Jurisdictions, the Scheme Document will also be made available on TalkTalk's website at www.talktalkgroup.com, on Toscafund's website at www.toscafund.com and on Penta's website at www.pentacapital.com.

17.  Right to switch to a Takeover Offer

The Offeror reserves the right to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme, subject to obtaining the consent of the Panel.

In such event, the Acquisition will be implemented on the same terms and conditions, so far as applicable, as those which would apply to the Scheme (subject to appropriate amendments for an acquisition being made by way of a Takeover Offer, including (without limitation) the inclusion of an acceptance condition set at 90 per cent. of the TalkTalk Shares to which the Takeover Offer relates (or such lesser percentage as may be determined by the Offeror after consultation with the Panel (if necessary)), being in any case more than 50 per cent. of the voting rights normally exercisable at a general meeting of TalkTalk, including, for this purpose, any such voting rights attaching to TalkTalk Shares that are issued before the Takeover Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise). Further, if sufficient acceptances of the Takeover Offer are received and/or sufficient TalkTalk Shares are otherwise acquired, it is the intention of the Offeror to apply the provisions of the Companies Act to compulsorily acquire any outstanding TalkTalk Shares to which the Takeover Offer relates.

18.  De-listing and re-registration

It is intended that dealings in TalkTalk Shares will be suspended on or shortly before the Effective Date at a time to be set out in the Scheme Document. It is further intended that an application will be made to each of the London Stock Exchange and the FCA to cancel trading in TalkTalk Shares on the London Stock Exchange's main market and to remove the listing of the TalkTalk Shares from the Official List respectively with effect from or shortly after the Effective Date.

The last day of dealing in TalkTalk Shares on the London Stock Exchange's main market is currently expected to be the Business Day immediately prior to the Effective Date and it is currently intended that no transfers will be registered after 6.00 p.m. on that date.

Share certificates in respect of TalkTalk Shares will cease to be valid and should be destroyed on the Effective Date. In addition, entitlements held within CREST to TalkTalk Shares will be cancelled on the Effective Date.

It is the Offeror's intention that, as soon as practicable following de-listing, TalkTalk will be re-registered as a private limited company.

19.  Disclosure of interests in TalkTalk

As at the close of business on the Latest Practicable Date, other than: (i) the disclosures set out in this paragraph 19; and (ii) the irrevocable undertakings referred to in paragraph 6 of this Announcement, none of the Offeror or any of its directors or, so far as the Offeror is aware, any person acting, or deemed to be acting, in concert with the Offeror, had:

(a)  an interest in, or right to subscribe for, relevant securities of TalkTalk;

(b)  any short position in (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of, relevant securities of TalkTalk;

(c)  procured an irrevocable commitment or letter of intent to accept the terms of the Acquisition in respect of relevant securities of TalkTalk; or

(d)  borrowed, lent or entered into any financial collateral arrangements or dealing arrangements of the kind referred to in Note 11 on the definition of acting in concert in the Code in respect of any relevant securities of TalkTalk.

Other than the irrevocable undertakings described in paragraph 6 of this Announcement, no arrangement exists between the Offeror or TalkTalk or any person acting in concert with the Offeror or TalkTalk in relation to TalkTalk Shares. For these purposes, an arrangement includes any indemnity or option arrangement, and any agreement or any understanding, formal or informal, of whatever nature, relating to TalkTalk Shares which may be an inducement to deal or refrain from dealing in such securities.

In this paragraph 19, "relevant securities of TalkTalk'' means TalkTalk Shares and securities convertible into, or rights to subscribe for, options (including traded options) in respect thereof and derivatives referenced thereto.

Holdings in TalkTalk of the Tosca Investors

The Tosca Investors beneficially own, in aggregate, 338,409,955 TalkTalk Shares, representing approximately 29.5 per cent. of the voting rights attributable to TalkTalk's issued share capital as at the Latest Practicable Date. 

20.  Overseas shareholders

The availability of the Acquisition (including, for the avoidance of doubt, the right to make an election for Consideration Shares under the Alternative Offer) and the distribution of this Announcement to persons resident in, or citizens of, or otherwise subject to, jurisdictions outside the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. TalkTalk Shareholders who are in any doubt regarding such matters should consult an appropriate independent professional adviser in the relevant jurisdiction without delay.

This Announcement is not intended to, and does not, constitute or form part of any offer to sell or to subscribe for, or any invitation to purchase or subscribe for, or the solicitation of any offer to purchase or otherwise subscribe for, any securities. TalkTalk Shareholders are advised to read carefully the Scheme Document, the Forms of Proxy and the Form of Election once these have been despatched.

Further information for TalkTalk Shareholders resident, or located, in overseas jurisdictions will be set out in the Scheme Document.

21.  General

The Scheme Document setting out further details of the Acquisition and the procedures to be followed in connection with the implementation of the Scheme, together with Forms of Proxy for the Court Meeting and the General Meeting and the Form of Election in respect of the Alternative Offer, will be published and sent to Scheme Shareholders (other than Restricted Overseas Shareholders) and, for information only, to participants in the TalkTalk Share Schemes and persons with information rights as soon as practicable after the Court Hearing to be held on 3 February 2021 at which it is expected that the Court will approve the Scheme Document for publication and posting. The Panel has consented to the Scheme Document being posted later than 28 days following the date of this Announcement.

The Acquisition will be made subject to the Conditions and further terms set out in Appendix 1 and to the full terms and conditions which will be set out in the Scheme Document. The sources and bases of calculation of certain information contained in this Announcement are set out in Appendix 2. Details of the irrevocable undertakings given in relation to the Acquisition are set out in Appendix 3. A summary of the key rights attaching to the Consideration Shares is set out at Appendix 4. Certain definitions and terms used in this Announcement are set out in Appendix 5.

In deciding whether or not to vote or procure votes to approve the Scheme at the Court Meeting or to vote or procure votes in favour of the Resolutions at the General Meeting in respect of their TalkTalk Shares, Scheme Shareholders who are eligible to vote should rely on the information contained, and follow the procedures described, in the Scheme Document.

Panmure Gordon, Barclays, Deutsche Bank and Lazard have each given and not withdrawn their consent to the publication of this Announcement with the inclusion herein of the references to their names in the form and context in which they appear.

22.  Documents available on websites

Copies of the following documents will, by no later than 12 noon on the Business Day following the date of this Announcement, be made available, free of charge, subject to certain restrictions relating to Restricted Overseas Shareholders, on TalkTalk's website at www.talktalkgroup.com, on Toscafund's website at www.toscafund.com and on Penta's website at www.pentacapital.com until the end of the Offer Period:

(a)  this Announcement;

(b)  the irrevocable undertakings referred to in paragraph 6 and summarised in Appendix 3 to this Announcement;

(c)  the confidentiality agreements referred to in paragraph 14 of this Announcement;

(d)  the Co-operation Agreement; and

(e)  the PIK Facility Agreement.

For the avoidance of doubt, the content of the websites referred to above is not incorporated into and does not form part of this Announcement.

Enquiries:

Panmure Gordon (UK) Limited (financial adviser to the Offeror)

Dominic Morley

Nick Lovering

Alina Vaskina

Tel: +44 (0) 20 7886 2500

Maitland/AMO (media enquiries for Tosca Penta)
Neil Bennett

Jason Ochere

 

 

Tel: +44 (0) 207 379 5151

Barclays Bank PLC, acting through its Investment Bank (Joint lead financial adviser, joint Rule 3 adviser and joint corporate broker to TalkTalk)

Robert Mayhew

Derek Shakespeare

Alex Evans

Akshay Majithia

 

Tel: +44 (0) 20 7623 2323

Deutsche Bank AG, London Branch (Joint lead financial adviser, joint Rule 3 adviser and joint corporate broker to TalkTalk)

James Arculus

Matt Hall

David Ibanez

Anna Mills

 

Tel: +44 (0) 20 7545 8000

Lazard & Co., Limited (financial adviser to TalkTalk)

Cyrus Kapadia     

Nicholas Page

  Tel: +44 (0) 20 7187 2000

 

 

TalkTalk

Tim Warrington, Head of Investor Relations

Dominic Laurie, Head of Communications and Campaigns

 

Tel: +44 (0) 7775 414 240

       Tel: +44 (0) 7814 810 626

 

 

Dickson Minto W.S. is acting as legal adviser to Tosca Penta and the Offeror. Osborne Clarke LLP is acting as legal adviser to TalkTalk.

The person responsible for arranging the release of this Announcement on behalf of the Offeror is Torquil Macnaughton, a director of the Offeror.

Important notices relating to financial advisers

Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised and regulated in the United Kingdom by the FCA, is acting as financial adviser exclusively for the Offeror and Tosca Penta and for no-one else in connection with the Acquisition and the matters described in this Announcement and will not be responsible to anyone other than the Offeror and Tosca Penta for providing the protections afforded to clients of Panmure Gordon nor for providing advice in relation to the Acquisition or any other matters referred to in this Announcement.

Barclays Bank PLC, acting through its Investment Bank, ("Barclays"), which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting exclusively for TalkTalk as joint financial adviser, joint Rule 3 adviser and joint corporate broker and for no-one else in connection with the Acquisition and the matters described in this Announcement and will not be responsible to anyone other than TalkTalk for providing the protections afforded to clients of Barclays or for providing advice in relation to the Acquisition or any other matters referred to in this Announcement.

In accordance with the Code, normal United Kingdom market practice and Rule 14e-5(b) of the US Exchange Act, Barclays and its affiliates will continue to act as exempt principal trader in TalkTalk securities on the London Stock Exchange. These purchases and activities by exempt principal traders which are required to be made public in the United Kingdom pursuant to the Code will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com. This information will also be publicly disclosed in the United States to the extent that such information is made public in the United Kingdom.

Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the PRA. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the PRA and the FCA. Details about the extent of its authorisation and regulation by the PRA, and regulation by the FCA are available on request or from www.db.com/en/content/eu_disclosures.html. Deutsche Bank AG, London Branch ("Deutsche Bank"), is acting exclusively for TalkTalk as joint financial adviser, joint Rule 3 adviser and joint corporate broker and for no one else in connection with the Acquisition and the matters described in this Announcement, and Deutsche Bank, will not be responsible to anyone other than TalkTalk for providing the protections afforded to clients of Deutsche Bank, or for providing advice in relation to the Acquisition or any other matters referred to in this Announcement.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated by the FCA in the United Kingdom, is acting exclusively for TalkTalk and for no one else in connection with the Acquisition and will not be responsible to anyone other than TalkTalk for providing the protections afforded to its clients or for providing advice in connection with the Acquisition.  Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this document, any statement contained herein, the Acquisition or otherwise.

Further information

This Announcement is for information purposes only and is not intended to, and does not, constitute or form part of any offer or invitation to purchase, otherwise acquire or subscribe for or dispose of any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise. The Acquisition will be made solely through the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the offer document), which will contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Scheme. Any voting decision or response in relation to the Acquisition should be made solely on the basis of the Scheme Document.

This Announcement does not constitute a prospectus or a prospectus exempt document.

This Announcement has been prepared for the purpose of complying with English law and the Code, and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside England.

Overseas shareholders

The release, publication or distribution of this Announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are not resident in the United Kingdom or who are subject to the laws of any jurisdiction other than the United Kingdom (including Restricted Jurisdictions) should inform themselves about, and observe, any applicable legal or regulatory requirements. In particular, the ability of persons who are not resident in the United Kingdom or who are subject to the laws of any jurisdiction other than the United Kingdom to participate in the Acquisition or to vote their Scheme Shares in respect of the Scheme at the Court Meeting, or to execute and deliver Forms of Proxy appointing another person to vote at the Court Meeting on their behalf, may be affected by the laws of the relevant jurisdictions in which they are located or to which they are subject. Any failure to comply with applicable legal or regulatory requirements of any jurisdiction may constitute a violation of securities laws in that jurisdiction. To the fullest extent permitted by applicable law, the companies, advisers and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

Unless otherwise determined by the Offeror or required by the Code, and permitted by applicable law and regulation, the Acquisition shall not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws or regulations in that jurisdiction and no person may vote in favour of the Acquisition by use of the mails or any other means or instrumentality (including, without limitation, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction or from within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction.

The Acquisition will be subject to the applicable requirements of English law, the Court, the Code, the Panel and the London Stock Exchange.

Copies of this Announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction or any other jurisdiction where to do so would constitute a violation of the laws or regulations of such jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in, into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of, or acceptance of, the Acquisition.

If the Acquisition is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover Offer may not be made, directly or indirectly, in or into, or by use of the mails or any other means or instrumentality (including, without limitation, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction and the Takeover Offer will not be capable of acceptance by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction.

The availability of the Acquisition to TalkTalk Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The availability of the Consideration Shares to persons who are not resident in the United Kingdom may be affected by the laws and/or regulations of the relevant jurisdiction in which they are located.  Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Consideration Shares have been, nor will they be, registered under or offered in compliance with applicable securities laws of any state, province, territory or jurisdiction of Canada, Australia or Japan. Accordingly, the Consideration Shares are not being and may not be (unless an exemption under relevant securities laws is applicable) offered, sold, resold or delivered, directly or indirectly, in or into or from Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of, or require registration thereof in, such jurisdiction or to, or for the account or benefit of, any Canadian, Australian or Japanese person.

Where the Offeror believes that an election for the Alternative Offer by any Scheme Shareholder may infringe applicable legal or regulatory requirements, or may result in a requirement for a registration under the securities laws of any Restricted Jurisdiction, the Offeror will have the right to deem that such Scheme Shareholder has not validly elected for the Alternative Offer and such Scheme Shareholder will instead receive the Cash Offer in respect of the Scheme Shares which were subject to such an election in accordance with the terms of the Acquisition.

Further details in relation to TalkTalk Shareholders in overseas jurisdictions will be contained in the Scheme Document.

Notice to US investors in TalkTalk

The Acquisition relates to the shares of an English company and is expected to be implemented by means of a scheme of arrangement provided for under the Companies Act. A transaction implemented by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act. The Acquisition is subject to the disclosure requirements and practices applicable to a scheme of arrangement involving a target company in England whose shares are traded on the main market of the London Stock Exchange, which differ from the disclosure requirements of the US tender offer and proxy solicitation rules. The financial information with respect to TalkTalk included in this Announcement and the Scheme Document has been or will have been prepared in accordance with IFRS or generally accepted accounting principles in the UK and may not therefore be comparable to the financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. If, in the future, the Offeror exercises its right to implement the Acquisition by way of a Takeover Offer and determines to extend the Takeover Offer into the US, the Acquisition will be made in compliance with applicable US laws and regulations, including Section 14(e) of the US Exchange Act and Regulation 14E thereunder.

The receipt of cash pursuant to the Scheme by US TalkTalk Shareholders as consideration for the transfer of TalkTalk Shares pursuant to the Scheme may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other, tax laws. Each TalkTalk Shareholder (including US TalkTalk Shareholders) is urged to consult their own independent professional adviser immediately regarding the legal and tax consequences of the Scheme.

Any Consideration Shares to be issued pursuant to the Acquisition have not been and will not be registered under the US Securities Act. Accordingly the Consideration Shares may not be offered, sold or delivered, directly or indirectly, in or into the US except pursuant to exemptions from, or transactions not subject to, the application requirements of such jurisdiction. It is expected that any Consideration Shares to be issued to TalkTalk Shareholders resident, or located, in the US will be issued in reliance upon the exemption from such registration provided by section 3(a)(10) of the US Securities Act.

Neither the SEC nor any US state securities commission has approved or disapproved or passed judgment upon the fairness or the merits of the Acquisition or determined if this Announcement is adequate, accurate or complete. Any representation to the contrary is a criminal offence in the US.

TalkTalk is incorporated under the laws of England. In addition, some or all of its officers and directors reside outside the US, and some or all of its assets are or may be located in jurisdictions outside the US. Therefore, investors may have difficulty effecting service of process within the US upon those persons or recovering against TalkTalk or its officers or directors on judgments of US courts, including judgments based upon the civil liability provisions of US federal securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgment. It may not be possible to sue TalkTalk or its officers or directors in a non-US court for violations of US securities laws.

In accordance with normal United Kingdom practice and pursuant to Rule 14e-5(b) of the US Exchange Act, the Offeror or its nominees or brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, TalkTalk Shares outside the US, other than pursuant to the Acquisition, until the date on which the Acquisition becomes Effective, lapses or is otherwise withdrawn, in compliance with applicable law, including the US Exchange Act. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases will be disclosed as required in the United Kingdom, will be reported via a Regulatory Information Service and will be available on the London Stock Exchange website at: http://www.londonstockexchange.com.

Forward-looking statements

This Announcement contains certain statements which are, or may be deemed to be, "forward-looking statements". These statements are based on the current expectations of the Offeror, Tosca Penta and/or TalkTalk (as the case may be) and are naturally subject to uncertainty and changes in circumstances. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as, without limitation, "anticipate", "target", "expect", "estimate", "intend", "plan", "forecast", "project", "goal", "believe", "aim", "will", "may", "hope", "continue", "would", "could" or "should" or other words of similar meaning or the negative thereof. Forward-looking statements include, but are not limited to, statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial conditions, dividend policy, losses and future prospects, (ii) business and management strategies and the expansion and growth of the operations of TalkTalk or the Offeror, and (iii) the effects of government regulation on the business of TalkTalk or the Offeror. There are many factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among such factors are changes in global, political, economic, business, competitive, market and regulatory forces, circumstances or conditions, future exchange and interest rates, changes in tax rates and future business combinations or disposals. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.

These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Except as expressly provided in this Announcement, neither they nor any other statements have been reviewed by the auditors of the Offeror, Tosca Penta and/or TalkTalk. By their nature, these forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. The factors described in the context of such forward-looking statements in this Announcement may cause the actual results, performance or achievements of any such person, or industry results and developments, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, none of the Offeror, Tosca Penta or TalkTalk can give any assurance that such expectations will prove to have been correct and persons reading this Announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this Announcement. None of the Offeror, Tosca Penta, TalkTalk or their respective members, directors, officers, employees, advisers or any person acting on behalf of one or more of them, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Announcement will actually occur.

Except as required by the FCA, the London Stock Exchange, the Part VI Rules or any other applicable law and/or regulation, none of the Offeror, Tosca Penta, TalkTalk or their respective members, directors, officers, employees, advisers or any person acting on behalf of one or more of them, has any intention or accepts any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. All subsequent oral or written forward-looking statements attributable to the Offeror, Tosca Penta, TalkTalk or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above.

No profit forecasts or estimates or quantified financial benefit statements

Save as set out in this Announcement, no statement in this Announcement is intended as a profit forecast, profit estimate or quantified financial benefit statement for or in respect of the Offeror, Toscafund, Penta or TalkTalk for any period and no statement in this Announcement should be interpreted to mean that cash flow from operations, earnings, or earnings per share or income of those persons (where relevant) for the current or future financial years would necessarily match or exceed the historical published cash flow from operations, earnings, earnings per share or income of those persons (as appropriate).

Publication on websites

A copy of this Announcement and the documents required to be published pursuant to Rule 26.1 and Rule 26.2 of the Code will be made available (subject to certain restrictions relating to persons resident in Restricted Jurisdictions), free of charge, on TalkTalk's website at www.talktalkgroup.com, on Toscafund's website at www.toscafund.com and on Penta's website at www.pentacapital.com by no later than 12 noon on the Business Day following the date of this Announcement.

Neither the content of these websites nor the content of any other website accessible from hyperlinks on such websites is incorporated into, or forms part of, this Announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Code, a person so entitled may request a copy of this Announcement (and any information incorporated into it by reference to another source) in hard copy form free of charge. A person may also request that all future documents, announcements and information sent to that person in relation to the Acquisition should be in hard copy form. For persons who have received a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent to you unless you have previously notified TalkTalk's registrar, Equiniti Limited, that you wish to receive all documents in hard copy form or unless requested in accordance with the procedure set out below.

If you would like to request a hard copy of this Announcement please contact Dominic Morley, Nick Lovering or Alina Vaskina at Panmure Gordon (UK) Limited during business hours on + 44 (0) 20 7886 2500 or by submitting a request in writing to any of them at Panmure Gordon (UK) Limited, One New Change, London EC4M 9AF.

Information relating to TalkTalk Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by TalkTalk Shareholders, persons with information rights and other relevant persons for the receipt of communications from TalkTalk may be provided to the Offeror during the Offer Period as required under section 4 of Appendix 4 to the Code.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk , including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

General

If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser duly authorised under FSMA if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

Time

All times referred to in this Announcement are London times, unless otherwise stated.

 

 

Appendix 1

Conditions and further terms of the acquisition AND THE SCHEME

The Acquisition will be subject to the Conditions and terms set out in this Appendix 1 and in the Scheme Document.

Part A

Conditions to the Acquisition and the Scheme

  Long Stop Date

1.  The Acquisition will be conditional upon the Scheme becoming unconditional and Effective, subject to the Code, by no later than 11.59 p.m. on the Long Stop Date.

Scheme approval

2.  The Scheme will be conditional upon:

(a) 

(i)  its approval by a majority in number representing not less than 75 per cent. of the voting rights of Scheme Shareholders who are on the register of members of TalkTalk at the Voting Record Time (or the relevant class or classes thereof, if applicable) in each case present, entitled to vote and voting, either in person or by proxy, at the Court Meeting and at any separate class meeting which may be required by the Court or at any adjournment of any such meeting(s); and

(ii)  the Court Meeting and any separate class meeting which may be required by the Court or any adjournment of any such meeting(s) being held on or before the 22nd day after the expected date of the Court Meeting to be set out in the Scheme Document in due course (or such later date, if any, as the Offeror and TalkTalk may agree and the Court may allow);

(b) 

(i)  the Resolutions being duly passed by the requisite majority or majorities at the General Meeting or at any adjournment of that meeting; and

(ii)  the General Meeting or any adjournment of that meeting being held on or before the 22nd day after the expected date of the General Meeting to be set out in the Scheme Document in due course (or such later date, if any, as the Offeror and TalkTalk may agree and the Court may allow); and

(c) 

(i)  the sanction of the Scheme by the Court with or without modification (but subject to any such modification being on terms acceptable to the Offeror and TalkTalk);

(ii)  the Court Hearing being held on or before the 22nd day after the expected date of the Court Hearing to be set out in the Scheme Document in due course (or such later date, if any, as the Offeror and TalkTalk may agree and the Court may allow); and

(iii)  the delivery of a copy of the Court Order to the Registrar of Companies for registration.

General Conditions

3.  In addition, the Offeror and TalkTalk have agreed that, subject as stated in Part B below and to the requirements of the Panel and in accordance with the Code, the Acquisition will also be conditional upon the following Conditions and, accordingly, the necessary actions to make the Scheme Effective will not be taken unless the following Conditions (as amended if appropriate) have been satisfied or, where relevant, waived:

Specific regulatory clearances

(a)  to the extent that any new or amended national security, public interest or foreign investment laws, rules or regulations (including the proposed National Security and Investment Bill) become effective in the United Kingdom between the date of this Announcement and the Scheme becoming Effective and such laws, rules or regulations would apply to the Acquisition, the Secretary of State for Business, Energy and Industrial Strategy (or such other relevant regulatory authority or body (as the case may be)) indicating, either unconditionally or subject to the giving of undertakings reasonably satisfactory to the Offeror and TalkTalk, that it has determined to approve the Acquisition or, as the case may be, no order being issued by the Secretary of State for Business, Energy and Industrial Strategy (or such other relevant regulatory authority or body (as the case may be)) or other legal or regulatory restraint or prohibition being in effect that would make completion of the Acquisition illegal and/or invalid;

General anti-trust and Third Party clearances

(b)  no anti-trust regulator, government or governmental, quasi-governmental, supranational, statutory, regulatory, administrative, environmental, fiscal, professional or investigative body, court, trade agency, association, institution, any entity owned or controlled by any relevant government or state in any jurisdiction (each a "Relevant Authority") having decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference (and in each case, not having withdrawn the same), or required any action to be taken or, or enacted, made or proposed any statute, regulation, decision, order or change to published practice (and in each case, not having withdrawn the same) and there not continuing to be outstanding any statute, regulation, decision or order, or otherwise having taken any other step or done anything, which would or might reasonably be expected to:

(i)  require, prevent or materially delay the divestiture, or materially alter the terms envisaged for any proposed divestiture, by any member of the Wider Offeror Group or any member of the Wider TalkTalk Group of all or any material portion of their respective businesses, assets or property or impose any material limitation on the ability of all or any of them to conduct their respective businesses (or any part thereof) or to own, control or manage any of their respective assets or properties (or any part thereof);

(ii)  require, prevent or materially delay, or materially alter the terms envisaged for, any proposed divestiture by any member of the Wider Offeror Group of any shares or other securities in TalkTalk or any other member of the Wider TalkTalk Group or in any member of the Wider Offeror Group;

(iii)  impose any material limitation on, or result in a material delay in, the ability of any member of the Wider Offeror Group directly or indirectly to acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or loans or securities convertible into shares or any other securities (or the equivalent) in TalkTalk or any other member of the Wider TalkTalk Group or to exercise voting or management control over TalkTalk or any other member of the Wider TalkTalk Group;

(iv)  otherwise materially adversely affect any or all of the business, assets, profits, value, financial or trading position or prospects of any member of the Wider Offeror Group or of any member of the Wider TalkTalk Group;

(v)  make the Scheme, the Acquisition or its implementation or the acquisition or proposed acquisition by the Offeror or any member of the Wider Offeror Group of any shares or other securities in, or control or management of, TalkTalk or any other member of the Wider TalkTalk Group void, voidable, illegal, and/or unenforceable under the laws of any relevant jurisdiction, or otherwise, directly or indirectly, prevent, restrain, restrict, prohibit, materially delay or otherwise materially adversely interfere with the same, or impose additional conditions or obligations with respect thereto, or otherwise challenge or interfere therewith, or require material amendment to the terms of the Acquisition, the Scheme or the acquisition or proposed acquisition of any shares or other securities in, or control of management of, TalkTalk or any other member of the Wider TalkTalk Group by any member of the Wider Offeror Group;

(vi)  require (save as envisaged in the Acquisition) any member of the Wider Offeror Group or the Wider TalkTalk Group to acquire or offer to acquire any shares or other securities (or the equivalent) or interest in any member of the Wider TalkTalk Group or the Wider Offeror Group or any other asset owned by any third party;

(vii)  result in any member of the Wider TalkTalk Group ceasing to be able to carry on business under any name under which it presently does so, the consequences of which would be material in the context of the TalkTalk Group taken as a whole; or

(viii)  impose any material limitation on or result in any material delay in the ability of any member of the Wider Offeror Group to conduct, integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider TalkTalk Group and/or the Wider Offeror Group,  

and all applicable waiting and other time periods (including extensions thereof) during which any such Relevant Authority could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or take any other step under the laws of any jurisdiction in respect of the Acquisition, the Scheme or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, TalkTalk or any other member of the Wider TalkTalk Group by any member of the Wider Offeror Group or otherwise intervene, having expired, lapsed or been terminated.

(c)  all material filings, applications and/or notifications which are necessary or considered appropriate by the Offeror (acting reasonably) having been made in connection with the Acquisition, the Scheme or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, TalkTalk or any other member of the Wider TalkTalk Group by any member of the Wider Offeror Group, and all relevant waiting periods and other time periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated (as appropriate) and all material statutory or regulatory obligations in any jurisdiction having been complied with in each case in connection with the Acquisition, the Scheme or the acquisition or proposed acquisition by any member of the Wider Offeror Group of any shares or other securities in, or control or management of, TalkTalk or any member of the Wider TalkTalk Group or the carrying on by any member of the Wider TalkTalk Group of its business;

(d)  all material authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals for the proposed acquisition of any shares or other securities in, or control or management of, TalkTalk or any other member of the Wider TalkTalk Group by any member of the Wider Offeror Group having been obtained in terms and in a form reasonably satisfactory to the Offeror from all appropriate Relevant Authorities or persons or bodies with whom any member of the Wider TalkTalk Group has entered into contractual arrangements, and all such authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals together with all authorisations orders, recognitions, grants, licences, confirmations, clearances, permissions and approvals necessary to carry on the business of any member of the Wider TalkTalk Group in any jurisdiction, remaining in full force and effect and all material filings necessary for such purpose have been made and there being no notice or intimation of any intention to revoke, suspend, restrict, modify or not to renew any of the same at the time at which the Acquisition becomes Effective or otherwise unconditional and all necessary statutory or regulatory obligations in any jurisdiction having been complied with;

Certain matters arising as a result of any arrangement, agreement etc.

(e)  except as Disclosed, there being no provision of any agreement, arrangement, licence, lease, permit, franchise or other instrument to which any member of the Wider TalkTalk Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or subject, which, in each case as a consequence of the Acquisition, the Scheme or the acquisition or proposed acquisition by any member of the Wider Offeror Group of any shares or other securities (or the equivalent) in TalkTalk or because of a change in the control or management of TalkTalk or any other member of the Wider TalkTalk Group or otherwise, would or would reasonably be expected to result in (in each case to an extent which is material in the context of the Wider TalkTalk Group taken as a whole, or in the context of the Acquisition):

(i)  any monies borrowed by, or any other indebtedness or liabilities (actual or contingent) of, or any grant available to, any such member being or becoming repayable or capable of being declared repayable immediately or earlier than their or its stated maturity date or repayment date, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;

(ii)  any such agreement, arrangement, licence, lease, permit, franchise or other instrument, or the rights, liabilities, obligations or interests of any such member thereunder, being terminated or adversely affected or modified or any onerous obligation or liability arising or any adverse action being taken or arising thereunder;

(iii)  any assets or interests of, or any asset the use of which is enjoyed by, any such member being or falling to be disposed of or charged or ceasing to be available to any such member or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any such member;

(iv)  the creation or enforcement of any mortgage, charge, encumbrance or other security interest over the whole or any part of the business, property or assets of any such member or any such mortgage, charge, encumbrance or other security interest (whenever created, arising or having arisen) becoming enforceable;

(v)  the rights, liabilities, obligations or interests of any such member under any such agreement, arrangement, licence, lease, permit, franchise or other instrument, or the business of any such member in or with any other person, firm or body (or any arrangement or arrangements relating to any such interest or business) being or becoming capable of being terminated or adversely modified or affected or any onerous obligation or liability arising or any adverse action being taken thereunder;

(vi)  the value of any such member or its financial or trading position, profits or prospects being prejudiced or adversely affected;

(vii)  any such member ceasing to be able to carry on business under any name under which it presently does so;

(viii)  the creation or acceleration of any liability, actual or contingent, by any such member, other than trade creditors or other liabilities incurred in the ordinary course of business;

(ix)  any liability of any such member to make any severance, termination, bonus or other payment to any of its directors; or

(x)  any requirement on any such member to acquire, subscribe, pay up or repay any shares or other securities (or the equivalent),

and no event having occurred which, under any provision of any agreement, arrangement, licence, lease, permit, franchise or other instrument to which any member of the Wider TalkTalk Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, would or might reasonably be expected to result in any of the events or circumstances as are referred to in sub-paragraphs (i) to (x) of this Condition.

Certain events occurring since 31 March 2020

(f)  except as Disclosed, no member of the Wider TalkTalk Group having, since 31 March 2020:

(i)  save as between TalkTalk and the Wider TalkTalk Group, or for TalkTalk Shares issued pursuant to the exercise of options granted under the TalkTalk Share Plans before the date of this Announcement, issued, agreed to issue, authorised or proposed the issue of additional shares of any class or securities convertible into shares of any class or rights, warrants or options to subscribe for, or acquire, any such shares or convertible securities;

(ii)  other than to another member of the TalkTalk Group, recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution whether payable in cash or otherwise;

(iii)  save for intra--Wider TalkTalk Group transactions, authorised, implemented or effected any merger or demerger with any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any right, title or interest in any asset (including shares and trade investments) or authorised or proposed or announced any intention to propose any merger, demerger, acquisition or disposal, transfer, mortgage, charge or security interest, in each case other than in the ordinary course of business which, in any such case, is material in the context of the TalkTalk Group taken as a whole;

(iv)  save for intra-Wider TalkTalk Group transactions, made or authorised or proposed or announced an intention to propose any material change in its loan capital or issued or authorised the issue of any debentures or incurred or increased any indebtedness or contingent liability;

(v)  issued, authorised or proposed the issue of any debentures or (save for intra--Wider TalkTalk Group transactions), save in the ordinary course of business, incurred or increased any indebtedness or become subject to any liability (actual or contingent);

(vi)  save for intra-Wider TalkTalk Group transactions, purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, save in respect to the matters mentioned in sub-paragraph (i) above, made any other change to any part of its share capital;

(vii)  implemented, or authorised, proposed or announced its intention to implement, any reconstruction, amalgamation, scheme, commitment or other transaction or arrangement otherwise than in the ordinary course of business or entered into or changed the terms of any contract with any director or senior executive;

(viii)  entered into or varied or authorised, proposed or announced its intention to enter into or vary any contract, agreement, arrangement, transaction or commitment (whether in respect of capital expenditure or otherwise) which is of a long term, onerous or unusual nature or magnitude or which is or would be reasonably likely to be restrictive on the business of any member of the Wider TalkTalk Group or the Wider Offeror Group or which involves an obligation of such a nature or magnitude or which is other than in the ordinary course of business and which, in any such case, is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(ix)  been unable or deemed unable, or admitted in writing that it is unable, to pay its debts as they fall due or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business which, in any such case, is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(x)  (other than in respect of a member of the Wider TalkTalk Group which is dormant and was solvent at the relevant time) taken or proposed any corporate action or steps or had any legal proceedings started or threatened against it for its winding--up (voluntary or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or had any such person appointed;

(xi)  commenced negotiations with any of its creditors or taken any step with a view to rescheduling or restructuring any of its indebtedness or entered into a composition, compromise, assignment or arrangement with any of its creditors whether by way of a voluntary arrangement, scheme of arrangement, deed of compromise or otherwise, which, in any such case, is material in the context of the Wider TalkTalk Group taken as a whole;

(xii)  entered into any contract, transaction or arrangement which would be restrictive on the business of any member of the Wider TalkTalk Group or the Wider Offeror Group other than to a nature and extent which is normal in the context of the business concerned;

(xiii)  waived, settled, abandoned or compromised any claim or admitted any dispute, claim or counter-claim, whether made or potential and whether by or against any member of the Wider TalkTalk Group (otherwise than in the ordinary course of business) and which is material in the context of the Wider TalkTalk Group taken as a whole;

(xiv)  entered into any contract, commitment, arrangement or agreement or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced any intention to, or to propose to, effect any of the transactions, matters or events referred to in this Condition 3(f);

(xv)  terminated or varied the terms of any agreement or arrangement between any member of the Wider TalkTalk Group and any other person in a manner which would or might reasonably be expected to be materially adverse to the Wider TalkTalk Group taken as a whole or to be material in the context of the Acquisition;

(xvi)  save for intra-Wider TalkTalk Group transactions, entered into, implemented or authorised the entry into of, any joint venture, asset or profit sharing arrangement, partnership or merger of business or corporate entities, in each case to an extent which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(xvii)  other than in connection with the Acquisition, made any material alteration to its constitutional documents;

(xviii)  made, proposed, or agreed or consented to or procured any change to:

(A)  the terms of the trust deeds or other governing documents constituting the pension scheme(s) established by any member of the Wider TalkTalk Group for its directors, former directors, employees, former employees or their dependents;

(B)  the contributions payable to any such scheme(s) or to the benefits which accrue, or to the pensions which are payable, thereunder;

(C)  the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined;

(D)  the basis upon which the liabilities (including pensions) of such pension schemes are funded, valued, made, agreed or consented to; or

(E)  the manner in which the assets of such pension schemes are invested,

in each case, to an extent which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(xix)  carried out any act (other than any act arising from or in connection with the Acquisition):

(A)  which would or could reasonably be expected to lead to the commencement of the winding up of any pension scheme(s) established by any member of the Wider TalkTalk Group for its directors, former directors, employees, former employees or their dependents;

(B)  would or might create a material debt owed by an employer to any such pension scheme;

(C)  which would or might accelerate any obligation on any employer to fund or pay additional contributions to any such pension scheme; or

(D)  which would, having regard to the published guidance of the Pensions Regulator, give rise to a liability on a member of the Wider TalkTalk Group to make payment to any such pension scheme arising out of the operation of sections 38 and 38A of the Pensions Act 2004,

in each case, to an extent which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(xx)  entered into or proposed to enter into one or more bulk annuity contracts in relation to any such pension scheme pursuant to which a member of the Wider TalkTalk Group is required to pay further contributions, or agreed to the entering into of a bulk annuity contract by a trustee of any such pension scheme;

(xxi)  proposed, agreed to provide or modified the terms of any share option scheme, incentive scheme or other benefit relating to the employment or termination of employment of any person employed by the Wider TalkTalk Group which, in any such case, is material in the context of the TalkTalk Group taken as a whole, other than in accordance with the terms of the Acquisition; or

(xxii)  having taken (or agreed or proposed to take) any action which requires, or would require, the consent of the Panel or the approval of TalkTalk Shareholders in a general meeting in accordance with, or as contemplated by, Rule 21.1 of the Code;

No adverse change, litigation or regulatory enquiry

(g)  except as Disclosed, since 31 March 2020:

(i)  no adverse change or deterioration having occurred, and no circumstances having arisen which would or might reasonably be expected to result in any adverse change or deterioration, in the business, assets, financial or trading position or profits or prospects of any member of the Wider TalkTalk Group to an extent which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(ii)  no litigation, arbitration proceedings, prosecution or other legal or regulatory proceedings to which any member of the Wider TalkTalk Group is or may become a party (whether as a claimant, defendant or otherwise) and no investigation, enquiry or complaint by any Relevant Authority or other investigative body against or in respect of any member of the Wider TalkTalk Group having been instituted, announced or threatened by or against or remaining outstanding in respect of any member of the Wider TalkTalk Group, in each case which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(iii)  no contingent or other liability having increased or arisen or become apparent to the Offeror which would be reasonably likely to adversely affect the business, assets, value of, or the financial or trading position, profits or prospects of any member of the Wider TalkTalk Group to an extent which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(iv)  no steps having been taken and no omissions having been made which are reasonably likely to result in the withdrawal, cancellation, termination or modification of any material licence held by any member of the Wider TalkTalk Group which is necessary for the proper carrying on of its business; and

(v)  no member of the Wider TalkTalk Group having conducted its business in breach of any applicable laws and regulations which in any case is material in the context of the Wider TalkTalk Group taken as a whole;

No discovery of certain matters

(h)  except as Disclosed, the Offeror not having discovered:

(i)  that any financial, business or other information concerning the Wider TalkTalk Group as contained in the information publicly announced before the date of this Announcement by or on behalf of any member of the Wider TalkTalk Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make that information not misleading and which was not subsequently corrected before the date of this Announcement by disclosure by or on behalf of the Wider TalkTalk Group through the publication of an announcement via a Regulatory Information Service or otherwise; or

(ii)  that any member of the Wider TalkTalk Group is subject to any liability (actual or contingent) which is not fairly disclosed in the annual report and accounts of TalkTalk for the financial year ended 31 March 2020,

in each case, to an extent which is material in the context of the Wider TalkTalk Group taken as a whole or in the context of the Acquisition;

(i)  except as Disclosed, the Offeror not having discovered that:

(i)  any past or present member of the Wider TalkTalk Group has failed to comply in any material respect with any and/or all applicable legislation or regulations or other requirements of any jurisdiction, or any permit, authorisation or other consent, with regard to the use, treatment, storage, carriage, disposal, spillage, release, discharge, leak or emission of any waste or hazardous substance or any substance likely to impair the environment (including property) or harm human health or animal health or otherwise relating to environmental matters or the health and safety of humans, or that there has otherwise been any such use, treatment, storage, carriage, disposal, spillage, release, discharge, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation, regulations or requirements, and wherever the same may have taken place) any of which use, treatment, storage, carriage, disposal, spillage, release, discharge, leak or emission or non-compliance would be likely to give rise to any material liability (actual or contingent) on the part of any member of the Wider TalkTalk Group; or

(ii)  there is, or is reasonably likely to be, for that or any other reason whatsoever, any material liability (actual or contingent) of any past or present member of the Wider TalkTalk Group to make good, remediate, repair, reinstate or clean up any property, asset or controlled waters now or previously owned, occupied, operated or made use of or controlled by any such past or present member of the Wider TalkTalk Group, under any environmental legislation, regulation, notice, circular or order of any government, governmental, quasi--governmental, state or local government, supranational, statutory or other regulatory body, agency, court, association or any other person or body in any jurisdiction and which is material in the context of the TalkTalk Group taken as a whole;

Anti-corruption, sanctions and criminal property

(j)  except as Disclosed, the Offeror not having discovered that:

(i)  any past or present member, director, officer, employee or agent of the Wider TalkTalk Group is or has at any time engaged in any activity, practice or conduct which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption legislation or any person that performs or has performed services for or on behalf of the Wider TalkTalk Group is or has at any time engaged in any activity, practice or conduct in connection with the performance of such services which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption legislation; or

(ii)  any asset of any member of the Wider TalkTalk Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition); or

(iii)  any past or present member, director, officer or employee of the Wider TalkTalk Group, or any other person for whom any such person may be liable or responsible, is or has engaged in any business or activity with, or made any investments in, or made any funds or assets available to or received any funds or assets from: (a) any government, entity or individual in respect of which US or European Union persons, or persons operating in those territories, are prohibited from engaging in activities or doing business, or from receiving or making available funds or economic resources, by US or European Union laws or regulations, including the economic sanctions administered by the US Office of Foreign Assets Control, or HM Treasury in the United Kingdom; or (b) any government, entity or individual targeted by any of the economic sanctions of the United Nations, the US, the European Union or any of its member states; or

(iv)  any member of the Wider TalkTalk Group has engaged in any transaction which would cause the Offeror or any other member of the Wider Offeror Group to be in breach of any law or regulation upon its acquisition of TalkTalk, including the economic sanctions of the US Office of Foreign Assets Control, or HM Treasury in the United Kingdom, or any government, entity or individual targeted by any of the economic sanctions of the United Nations, the US, the European Union or any of its member states.

Part B

Certain further terms of the Acquisition and the Scheme

1.  The Acquisition will be subject to the satisfaction (or waiver, if permitted) of the Conditions in Part A above, and to certain further terms set out in this Part B, and to the full terms and conditions which will be set out in the Scheme Document.

2.  Subject to the requirements of the Panel or the Court, the Offeror reserves the right to waive, in whole or in part, all or any of the Conditions in Part A above, except for Conditions 1, 2(a)(i), 2(b)(i) and 2(c)(i) which cannot be waived.

3.  Conditions 2(a), 2(b) and 3(a) to 3(j) (inclusive) must be fulfilled, or (if capable of waiver) waived, by no later than 11.59 p.m. on the date immediately preceding the date of the Court Hearing. The Acquisition will lapse if it does not become Effective by 11.59 p.m. on the Long Stop Date.

4.  The Offeror shall be under no obligation to waive (if capable of waiver) or treat as satisfied any of the Conditions by a date earlier than the latest date specified above for the fulfilment or waiver thereof, notwithstanding that the other Conditions to the Acquisition may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment.

5.  Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

6.  Under Rule 13.5(a) of the Code, the Offeror may not invoke any Condition so as to cause the Acquisition not to proceed, to lapse or to be withdrawn, unless the circumstances which give rise to the right to invoke the Condition are of material significance to the Offeror in the context of the Acquisition. Conditions 1 and 2 of Part A and, if applicable, the acceptance condition adopted on the basis of or referred to in paragraphs 7 or 11 of this Part B (in the event the Acquisition is implemented by way of a Takeover Offer) are not subject to this provision of the Code.

7.  If the Offeror is required by the Panel to make an offer for TalkTalk Shares under the provisions of Rule 9 of the Code, the Offeror may make such alterations to any of the above Conditions and terms of the Acquisition as are necessary to comply with the provisions of that Rule.

8.  The Acquisition shall lapse if:

(a)  in so far as the Acquisition or any matter arising from or relating to it or the Scheme constitutes, or is deemed to constitute, a concentration with an EU dimension within the scope of the EU Merger Regulation, the European Commission either initiates proceedings under Article 6(1)(c) of the EU Merger Regulation or makes a referral to the CMA under Article 9(1) of the EU Merger Regulation and then the Acquisition or any matter arising from or relating to it or the Scheme becomes subject to a CMA Phase 2 Reference; or

(b)  the Acquisition or any matter arising from or relating to it or the Scheme becomes subject to a CMA Phase 2 Reference,

in each case before the date of the Court Meeting.

9.  TalkTalk Shares will be acquired by the Offeror under the Acquisition fully paid and free from all liens, equities, equitable interests, charges, encumbrances, options, rights of pre-emption and any other third party rights or interests whatsoever and together with all rights existing at the date of this Announcement or thereafter attaching or accruing thereto, including (without limitation) voting rights and the right to receive and retain, in full, all dividends and other distributions (if any) declared, made or paid or any other return of capital (whether by way of reduction of share capital or share premium account or otherwise) made on or after the date of this Announcement, other than any dividend or distribution in respect of which the Offeror exercises its right under the terms of the Acquisition to reduce the consideration payable in respect of each TalkTalk Share.

10.  Without prejudice to any right the Offeror may have, with the consent of the Panel, to invoke Condition 3(f)(ii), if any dividend or other distribution is announced, declared, made, payable or paid in respect of the TalkTalk Shares on or after the date of this Announcement and prior to the Effective Date, the Offeror reserves the right to reduce the consideration payable in respect of each TalkTalk Share under the terms of the Acquisition by the amount of all or part of any such dividend or other distribution, provided that, to the extent that such dividend or distribution is cancelled, the consideration shall not be subject to change. If the Offeror exercises this right or makes such a reduction in respect of a dividend or other distribution, TalkTalk Shareholders will be entitled to receive and retain that dividend or other distribution.

11.  The Offeror reserves the right to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme, subject to obtaining the consent of the Panel. In such event, such Takeover Offer will be implemented on the same terms and conditions, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments for an acquisition being made by way of a Takeover Offer including (without limitation) the inclusion of an acceptance condition set at 90 per cent. of the TalkTalk Shares to which the Takeover Offer relates (or such lesser percentage as may be determined by the Offeror after consultation with the Panel (if necessary), being in any case more than 50 per cent. of the voting rights normally exercisable at a general meeting of TalkTalk, including, for this purpose, any such voting rights attaching to TalkTalk Shares that are issued before the Takeover Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise). Further, if sufficient acceptances of the Takeover Offer are received and/or sufficient TalkTalk Shares are otherwise acquired, it is the intention of the Offeror to apply the provisions of the Companies Act to compulsorily acquire any outstanding TalkTalk Shares to which the Takeover Offer relates.

12.  The availability of the Acquisition to persons resident in, or citizens of, or otherwise subject to, jurisdictions outside the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. TalkTalk Shareholders who are in any doubt regarding such matters should consult an appropriate independent professional adviser in the relevant jurisdiction without delay.

13.  Unless otherwise determined by the Offeror or required by the Code, the Acquisition is not being made, directly or indirectly, in, into or from, or by use of the mails of, or any means of instrumentality (including, without limitation, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction and shall not be capable of acceptance by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction.

14.  The Offeror reserves the right for any other entity directly or indirectly owned by the Offeror or by any fund managed or advised by Tosca Penta from time to time to implement the Acquisition.

15.  The Acquisition will be governed by English law and be subject to the jurisdiction of the Court and to the Conditions and further terms set out in this Appendix 1 and to be set out in the Scheme Document. The Acquisition will also be subject to the applicable requirements of the Code, the Panel and the London Stock Exchange.

Appendix 2

Sources of information and bases of calculation

1.  As at close of business on the Latest Practicable Date, TalkTalk had 1,146,269,670 ordinary shares in issue and no ordinary shares were held in treasury. Accordingly, as at close of business on the Latest Practicable Date, TalkTalk had 1,146,269,670 ordinary shares in issue and held outside of treasury.

2.  The fully diluted share capital of TalkTalk is calculated on the basis of: (a) the number of issued TalkTalk Shares set out in paragraph 1 above; and (b) no additional TalkTalk Shares being issued on or after the date of this Announcement on the exercise of options or other awards under the TalkTalk Share Plans (taking into account the exercise by TalkTalk's remuneration committee of applicable discretions).

3.  Unless otherwise stated, all prices quoted for TalkTalk Shares are Closing Prices.

4.  Volume-weighted average prices have been derived from Bloomberg and have been rounded to the nearest decimal place.

5.  The premium calculations to the price for each TalkTalk Share have been calculated by reference to:

(a)  the Closing Price of 83.3 pence for each TalkTalk Share on 7 October 2020 (being the last Business Day before commencement of the Offer Period);

(b)  the volume-weighted average price of 77.1 pence for each TalkTalk Share for the three month period ended 7 October 2020; and

(c)  the volume-weighted average price of 82.7 pence for each TalkTalk Share for the six month period ended 7 October 2020.

6.  Unless otherwise stated, the financial information relating to TalkTalk has been extracted from TalkTalk's annual report and accounts for the financial year ended 31 March 2020.

Appendix 3

Irrevocable undertakings

1.  TalkTalk directors' and senior employee irrevocable undertakings

The following TalkTalk Directors and senior employee, who are holders or controllers of TalkTalk Shares, have entered into irrevocable undertakings with the Offeror to vote (and, if applicable, procure the vote) in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting or, if the Offeror exercises its right to implement the Acquisition by way of a Takeover Offer, to accept or procure the acceptance of any such offer:

Person giving irrevocable undertaking

 

Number of TalkTalk Shares in respect of which the irrevocable undertaking is given1

 

Percentage of TalkTalk issued share capital

Sir Charles Dunstone

 

342,286,127

 

29.86%

Roger Taylor

 

11,326,688

 

0.99%

Timothy Morris


4,027,669


0.35%

Tristia Harrison

 

2,350,673

 

0.21%

Ian West

 

364,714

 

0.032%

Nigel Langstaff

 

299,736

 

0.026%

John Gildersleeve

 

291,866

 

0.025%

Phil Jordan

 

42,750

 

0.004%

Total

 

360,990,223

 

31.49%

 

Note:

1.   These figures refer only to the TalkTalk Shares to which the relevant TalkTalk Director or senior employee is   beneficially entitled or otherwise able to control the exercise of the rights attaching thereto. Any awards which   are outstanding under the TalkTalk Share Option Schemes are excluded, however, any shares awarded under the   TalkTalk Share Option Schemes prior to the Effective Date would be included in the scope of the irrevocable   undertakings.

Further each of the Rollover Management Shareholders has irrevocably undertaken to elect for (or procure the election for) the Alternative Offer in respect of their entire holding of TalkTalk Shares as set out above.

These irrevocable undertakings given by the TalkTalk Directors and senior employee, who are holders or controllers of TalkTalk Shares, shall lapse and cease to binding, inter alia, if: (a) a competing offer from a third party for the entire issued and to be issued share capital of TalkTalk is made which is declared wholly unconditional (if implemented by way of a takeover offer) or otherwise becomes effective (if implemented by way of a scheme of arrangement); (b) a competing offer from a third party for the entire issued and to be issued share capital of TalkTalk is announced, pursuant to Rule 2.7 of the Code, at a price per TalkTalk Share which is (or is equivalent to) at least 115 pence per TalkTalk Share; (c) the Acquisition lapses or is withdrawn without becoming Effective; or (d) the Offeror announces (with the consent of the Panel) that it will not proceed with the Acquisition.

2.  Toscafund irrevocable undertaking

Toscafund has entered into an irrevocable undertaking with the Offeror, on behalf of the Tosca Investors, to be bound by the Scheme or, if the Offeror exercises its right to implement the Acquisition by way of a Takeover Offer, to accept or procure the acceptance of any such offer as follows:

Entity beneficially entitled to the TalkTalk Shares

 

Number of TalkTalk Shares in respect of which the irrevocable undertaking is given

 

Percentage of TalkTalk issued share capital

Tosca Opportunity

 

139,808,786

 

12.20%

TEMF Ltd

 

85,872,906

 

7.49%

Tosca Service III LP

 

57,929,598

 

5.05%

Tosca Mid Cap

 

36,758,460

 

3.21%

The Pegasus Fund Limited

 

10,679,350

 

0.93%

Tosca Select LP

 

4,000,000

 

0.35%

Tosca Recovery Select SPV

 

3,360,855

 

0.29%

Total

 

338,409,955

 

29.52%

 

Further Toscafund, on behalf of the Tosca Investors, has irrevocably undertaken to elect for (or procure the election for) the Alternative Offer in respect of at least 273,195,877 TalkTalk Shares (provided that the minimum number of TalkTalk Shares subject to such irrevocable undertaking shall be reduced by whichever is the lesser of: (a) 64,948,454 TalkTalk Shares; and (b) such number of TalkTalk Shares as are the subject of valid elections for the Alternative Offer which have been received (and not withdrawn) as at the time which is immediately after the last date for withdrawal of such elections but not including TalkTalk Shares which are the subject of elections from the Electing Managers, such that the number of TalkTalk Shares in respect of which Toscafund will elect to take the Alternative Offer shall not be less than 208,247,423).

The irrevocable undertaking given by Toscafund on behalf of the Tosca Investors shall lapse and cease to binding, inter alia, if: (a) a competing offer from a third party for the entire issued and to be issued share capital of TalkTalk is made which is declared wholly unconditional (if implemented by way of a takeover offer) or otherwise becomes effective (if implemented by way of a scheme of arrangement); (b) the Acquisition lapses or is withdrawn without becoming Effective; or (c) the Offeror announces (with the consent of the Panel) that it will not proceed with the Acquisition.

 

APPENDIX 4

THE OFFEROR GROUP AND CONSIDERATION SHARES

1.  Additional information in respect of the Offeror Group

The Offeror Group is owned and controlled by Tosca Penta and was formed for the purpose of implementing the Acquisition. As at the date of this Announcement, the Offeror Group comprises the Offeror, Midco and Finco. None of the members of the Offeror Group has traded since the date of its incorporation nor entered into any obligations other than in connection with the Acquisition and its financing.

The holding company in the Offeror Group is the Offeror. The Offeror is the sole shareholder of Midco, a private limited company which was incorporated in England and Wales on 29 October 2020 under the Companies Act with registered number 12985026, and Finco, a private limited company which was incorporated in England and Wales on 29 October 2020 under the Companies Act with registered number 12984607.

Finco is the borrower under the PIK Facility Agreement and will lend funds which it receives pursuant to the PIK Facility Agreement to the Offeror in order to fund the cash consideration due in connection with the Acquisition (the "Offeror Group Loan").

Following the Scheme becoming Effective, the Offeror will transfer its interest in the entire issued share capital of TalkTalk to Finco in consideration of, in aggregate, the settlement of the Offeror Group Loan and the issue of further shares by Finco to the Offeror (the "Offeror TalkTalk Share Transfer").

Following the Offeror TalkTalk Share Transfer, it is anticipated that the Offeror will transfer its interest in the entire issued share capital of Finco to Midco in consideration of the issue of further shares by Midco to the Offeror.

2.  Control of the Offeror

Tosca Penta is seeking to raise additional equity funds which it would manage/advise and which would be used either to subscribe for new Offeror Ordinary Shares and, thereafter, to fund cash consideration due in connection with the Acquisition and/or to repay amounts borrowed under the PIK Facility Agreement for the purposes of financing the Acquisition, or otherwise to acquire part of the Tosca Investors' investment in the Offeror that arises as a result of the Tosca Investors electing for the Alternative Offer. Any such funds do not form part of the financial resources available to the Offeror to enable it to satisfy in full the cash consideration payable under the Acquisition and on which Panmure Gordon has based its statement in paragraph 13 of this Announcement. To the extent that such additional equity funds are subscribed for new Offeror Ordinary Shares, the share of the Offeror managed/advised by Tosca Penta will increase and the share of the Offeror owned by Sir Charles Dunstone and other Scheme Shareholders who elect for the Alternative Offer will proportionately decrease.

The Acquisition will be structured such that neither the share of the Offeror managed/advised by Tosca Penta nor the share of the Offeror owned by Sir Charles Dunstone nor any other shareholder of the Offeror will exceed 50 per cent. and as such there will be no ultimate change of control of TalkTalk.

3.  Offeror share capital

As at the date of this Announcement, the issued share capital of the Offeror is 100 Offeror Ordinary Shares which are held by Penta Investments GP Limited, an indirect subsidiary of Penta. On or around the time at which the Scheme becomes Effective, the Offeror will issue new Offeror Ordinary Shares to the New Tosca Penta Funds to fund part of the cash consideration payable in respect of the Acquisition. Upon the Scheme becoming Effective, the Offeror will issue Consideration Shares to the Tosca Investors, Sir Charles Dunstone, Roger Taylor, Tristia Harrison, John Gildersleeve and Timothy Morris and other TalkTalk Shareholders who have elected for the Alternative Offer pursuant to the Alternative Offer.

As set out in paragraph 4 of this Appendix 4 below, it is anticipated that, following the Scheme becoming Effective and the subsequent fundraising by Penta, any further new issues of Offeror Ordinary Shares will be on a pre-emptive basis. There may, however, be some circumstances in which the directors of the Offeror consider that it would be appropriate to issue further Offeror Ordinary Shares on a non pre-emptive basis. In such circumstances the appropriate Offeror shareholder approvals shall be sought, however, this may result in the interests of TalkTalk Shareholders who elected to take up the Alternative Offer in the Offeror becoming diluted over time.

4.  Rights attaching to Offeror Ordinary Shares

The share capital of the Offeror will comprise one class of ordinary shares with a nominal value of £0.01 each ("Offeror Ordinary Shares").

Voting rights

On a poll, one vote per share.

New share issues

All new issues of shares and shareholder debt (other than intra-group issues by wholly owned subsidiaries) to be made on a pro-rata, pre-emptive basis. Pre-emption rights may only be disapplied by special resolution.  

Share transfers

Offeror Ordinary Shares will not be transferable except for certain categories of permitted transfer, transfers on exercise of the drag-along or tag-along (each as described below) and transfers made with the written consent of the holders of not less than 75 per cent. of the Offeror Ordinary Shares. 

Drag-along

If the holders of more than 75 per cent. of the Offeror Ordinary Shares agree a sale to a bona fide third party and the consideration is payable in cash or a readily realisable cash equivalent then the buyer may drag the remaining shareholders on the same terms.

Tag-along

If any person other than Sir Charles Dunstone or Tosca Penta (together with persons acting in concert with the relevant one of them) acquires more than 50 per cent. of the Offeror Ordinary Shares then the remaining shareholders may tag at a price per share equal to the highest price per share paid by the buyer in the 12 months prior to and including the sale/purchase which triggered the tag right.  

Board appointment rights

Any shareholder who holds 20 per cent. or more of the Offeror Ordinary Shares may appoint/remove two directors to the board of the Offeror and, thereafter, one further director for each additional 10 per cent. of shares held up to a maximum of four. For this purpose, the funds managed by Tosca Penta shall be considered to be a single shareholder. The shareholder(s) appointing a director may require that director to be appointed to any committee of the board of the Offeror and to the board of any group company. Any other appointment or removal of a director shall require the written consent of the holders of not less than 75 per cent. of the Offeror Ordinary Shares.

Conduct of the Offeror Group

All material matters will be decided upon by the board of directors of the Offeror. In addition, there are a number of matters set out in the Articles of Association which will require the written consent of (or ratification by) the holders of not less than 75 per cent. of the Offeror Ordinary Shares. 

 

APPENDIX 5

Definitions

The following definitions apply throughout this Announcement unless the context otherwise requires:

Acquisition

the proposed acquisition by the Offeror of the entire issued and to be issued ordinary share capital of TalkTalk, to be implemented by means of the Scheme, on the terms and subject to the Conditions set out in this Announcement and to be set out in the Scheme Document (or by means of a Takeover Offer, under certain circumstances as described in this Announcement) and, where the context permits, any subsequent revision, variation, extension or renewal thereof;

Alternative Offer

the alternative offer under which TalkTalk Shareholders (other than Restricted Overseas Shareholders) may elect to receive Consideration Shares, in lieu of cash under the Cash Offer, on the basis of one Consideration Share for each Scheme Share held;

Announcement

this announcement made in accordance with Rule 2.7 of the Code;

Ares

Ares Management Limited;

Articles of Association

the articles of association of the Offeror adopted on 17 December 2020;

associated undertaking

shall be construed in accordance with paragraph 19 of Schedule 6 to the Large and Medium‑sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) but for this purpose ignoring paragraph 19(1)(b) of Schedule 6 to those regulations;

Australia

the commonwealth of Australia, its states, possessions and territories and all areas subject to its jurisdiction or any political subdivision thereof;

Business Day

a day (other than a Saturday, Sunday or public holiday) on which banks in London are open for normal business;

Canada

Canada, its possessions, provinces and territories and all areas subject to its jurisdiction or any political subdivision thereof;

Cash Offer

the Offer Price, in cash, payable in consideration for each Scheme Share held under the terms, and subject to the conditions of, the Acquisition;

certificated or in certificated form

where a share or other security is not in uncertificated form (that is, not in CREST);

Closing Price

the closing middle market quotation of a TalkTalk Share as derived from the Daily Official List of the London Stock Exchange;

CMA

the Competition and Markets Authority of the United Kingdom (or any successor body or bodies carrying out the same functions in the United Kingdom from time to time);

CMA Phase 2 Reference

a reference pursuant to sections 22, 33, 45 or 62 of the Enterprise Act 2002 (as amended) of the Acquisition to the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013;

Code

the City Code on Takeovers and Mergers (as amended from time to time);

Companies Act

the Companies Act 2006 (as amended from time to time);

Conditions

the conditions to the Acquisition, as set out in Part A of Appendix 1, and to be set out in the Scheme Document;

Consideration Shares

Offeror Ordinary Shares to be issued pursuant to the Alternative Offer;

Court

the High Court of Justice, Business and Property Courts of England and Wales, Companies Court;

Court Hearing

the hearing of the Court to sanction the Scheme under section 899 of the Companies Act;

Court Meeting

the meeting or meetings of Scheme Shareholders convened by order of the Court pursuant to section 896 of the Companies Act, notice of which will be set out in the Scheme Document, for the purposes of considering and, if thought fit, approving the Scheme (with or without modification or amendment approved or imposed by the Court and agreed to by the Offeror and TalkTalk) and any adjournment, postponement or reconvention thereof;

Court Order

the order of the Court sanctioning the Scheme under section 899 of the Companies Act;

CREST

 

the system for the paperless settlement of trades in securities and the holding of uncertificated securities operated by Euroclear in accordance with the CREST Regulations;

CREST Regulations

the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended from time to time;

Dealing Disclosure

an announcement pursuant to Rule 8 of the Code containing details of dealings in relevant securities of a party to an offer;

Disclosed

 

the information which has been fairly disclosed:

(a)  by or on behalf of TalkTalk to the Offeror or Tosca Penta or to the professional advisers of the Offeror or Tosca Penta (in their capacity as such in relation to the Acquisition) prior to the date of this Announcement;

(b)  in the annual report and accounts of TalkTalk for the financial year ended 31 March 2020;

(c)  in this Announcement; or

(d)  in any other public announcement made by TalkTalk via a Regulatory Information Service prior to the date of this Announcement;

DTRs

the disclosure guidance and transparency rules made by the FCA pursuant to section 73A of FSMA (as amended from time to time);

Effective

in the context of the Acquisition: (a) if the Acquisition is implemented by way of the Scheme, the Scheme having become effective pursuant to its terms, upon the delivery of the Court Order to the Registrar of Companies for registration; or (b) if the Acquisition is implemented by way of the Takeover Offer, the Takeover Offer having been declared or having become unconditional in all respects in accordance with the requirements of the Code;

Effective Date

the date on which the Scheme becomes Effective;

EU Merger Regulation

Council Regulation (EC) No. 139/2004;

Euroclear

Euroclear UK & Ireland Limited, incorporated in England and Wales with registered number 02878738;

Excluded Shares

any TalkTalk Shares which, at the relevant time, are:

(a)  registered in the name of or beneficially owned by the Offeror or any other member of the Offeror Group (or their nominee(s)); or

(b)  held in treasury;

FCA

the Financial Conduct Authority or its successor from time to time;

Finco

Tosca IOM Finco Limited, a company incorporated in England and Wales with registered number 12984607 whose registered office is at Level 13, Broadgate Tower, 20 Primrose Street, London EC2A 2EW;

Form of Election

the form of election for use in respect of the Alternative Offer by Scheme Shareholders who hold their TalkTalk Shares in certificated form only, which (subject to exceptions for certain overseas jurisdictions) will accompany the Scheme Document;

Forms of Proxy

the forms of proxy for use in connection with each of the Court Meeting and the General Meeting, which will accompany the Scheme Document;

FSMA

the Financial Services and Markets Act 2000 (as amended from time to time);

General Meeting

the general meeting of TalkTalk Shareholders (including any adjournment, postponement or reconvention thereof) to be convened for the purpose of considering and, if thought fit, approving the Resolutions, notice of which shall be contained in the Scheme Document;

IFRS

International Financial Reporting Standards, as adopted by the European Union;

Independent TalkTalk Directors

each of Ian West, Sir Howard Stringer, Nigel Langstaff and Phil Jordan;

Japan

Japan, its cities, prefectures, territories and possessions and all areas subject to its jurisdiction or any political subdivision thereof;

Latest Practicable Date

16 December 2020;

Listing Rules

the listing rules made by the FCA pursuant to section 73A of FSMA (as amended for time to time);

London Stock Exchange

London Stock Exchange plc or its successor;

Long Stop Date

 

30 June 2021 or such later date (if any) as the Offeror and TalkTalk may agree, with the consent of the Panel, and which (if required) the Court may allow;

Meetings

the Court Meeting and the General Meeting;

Midco

Tosca IOM Midco Limited, a company incorporated in England and Wales with registered number 12985026 whose registered office is at Level 13, Broadgate Tower, 20 Primrose Street, London EC2A 2EW;

New Tosca Penta Funds

together, Tosca Penta Jersey Fund and Tosca Penta LP Fund;

Non-independent TalkTalk Directors

the TalkTalk Directors other than the Independent TalkTalk Directors;

Offer Period

the period commencing on 8 October 2020 and ending on: (a) the earlier of the date on which the Scheme becomes Effective and/or the date on which the Scheme lapses or is withdrawn (or such other date as the Panel may decide); or (b) the earlier of the date on which the Takeover Offer has become or has been declared unconditional as to acceptances and/or the date on which the Takeover Offer lapses or is withdrawn (or such other date as the Panel may decide), other than (in the case of (a)) where such lapsing or withdrawal is a result of the Offeror exercising its right to implement the Acquisition by way of a Takeover Offer;

Offer Price

97 pence for every TalkTalk Share payable under the Cash Offer;

Offeror

 

Tosca IOM Limited, a company incorporated in England and Wales with registered number 12903683 whose registered office is at Level 13, Broadgate Tower, 20 Primrose Street, London EC2A 2EW;

Offeror Directors

the directors of Offeror as at the date of this Announcement or, where the context so requires, the directors of the Offeror from time to time;

Offeror Group

the Offeror and its subsidiary undertakings from time to time;

Offeror Ordinary Shares

ordinary shares of £0.01 each in the capital of the Offeror;

Official List

the official list of the FCA;

Panel

the Panel on Takeovers and Mergers;

Part VI Rules

together, the DTRs, the Listing Rules and the Prospectus Regulation Rules;

Penta

Penta Capital LLP, a limited liability partnership registered in Scotland with registered number SO302035 whose registered office is at 150 St. Vincent Street, Glasgow G2 5NE;

PIK Facility Agreement

the PIK term loan facility agreement dated 17 December 2020 and made between Finco (as the PIK Borrower), the Offeror, Midco and Finco (as Guarantors), Ares (as Arranger, Agent and Security Agent) and the Financial Institutions listed in Schedule 1 thereto (as Lenders) (as amended, restated or supplemented from time to time);

PRA

the Prudential Regulation Authority or its successor from time to time;

Prospectus Regulation Rules

the prospectus regulation rules made by the FCA pursuant to section 73A of FSMA;

Registrar of Companies

the registrar of companies in England and Wales;

Regulatory Information Service

an information service authorised from time to time by the FCA for the purposes of disseminating regulatory announcements;

Relevant Authority

has the meaning given to it in paragraph 3(b) of Part A of Appendix 1 to this Announcement;

relevant securities

shall be construed in accordance with the Code;

Restricted Jurisdiction(s)

Japan, Canada, Australia (or their respective territories) or any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure if information concerning the Acquisition is sent or made available to TalkTalk Shareholders in that jurisdiction;

Restricted Overseas Shareholder

a person (including, without limitation, an individual, partnership, unincorporated syndicate, limited liability company, unincorporated organisation, trust, trustee, executor, administrator or other legal representative) in, or resident in, or any person whom TalkTalk (following consultation with the Offeror) reasonably believes to be in, or resident in Australia, Canada or Japan and persons in any other jurisdiction whom TalkTalk (following consultation with the Offeror) is advised to treat as restricted overseas persons in order to observe the laws of such jurisdiction or to avoid the requirement to comply with any governmental or other consent or any registration, filing or other formality which TalkTalk (following consultation with the Offeror) regards as unduly onerous;

Resolutions

such shareholder resolutions of TalkTalk as are necessary to approve, implement and effect the Acquisition and the Scheme to be proposed at the General Meeting, including (without limitation) a special resolution relating to the Acquisition;

Rollover Management Shareholders

each of Sir Charles Dunstone, Roger Taylor, Tristia Harrison, John Gildersleeve and Timothy Morris;

Scheme

the proposed scheme of arrangement under Part 26 of the Companies Act between TalkTalk and Scheme Shareholders in order to implement the Acquisition, upon the terms and subject to the conditions set out in this Announcement and to be set out in the Scheme Document (with or subject to any modification, addition or condition which the Offeror and TalkTalk may agree and the Court may impose or, if required, approve);

Scheme Document

the document to be despatched to Scheme Shareholders including, among other things, the Scheme, an explanatory statement and the notices convening the Court Meeting and the General Meeting (and shall include any supplementary scheme document if applicable);

Scheme Record Time

the record date and time for the Scheme, as specified in the Scheme Document;

Scheme Shareholder(s)

the holder(s) of Scheme Shares from time to time excluding the Tosca Investors;

Scheme Shares

all TalkTalk Shares:

(a)  in issue at the date of the Scheme Document;

(b)  if any, issued after the date of the Scheme Document and before the Voting Record Time; and

(c)  if any, issued at or after the Voting Record Time and before the Scheme Record Time, either on terms that the original or any subsequent holders of such shares are to be bound by the Scheme or in respect of which their holders are, or shall have agreed in writing to be, bound by the Scheme,

but, in each case, other than Excluded Shares;

SEC

the US Securities and Exchange Commission;

Shareholders' Agreement

the agreement to be entered into on or around the Effective Date among the Offeror, the New Penta Funds, the Tosca Investors and certain TalkTalk Directors and senior managers who elect for the Alternative Offer;

Significant Interest

 

in relation to an undertaking, a direct or indirect interest of 20 per cent. or more of: (a) the total voting rights conferred by the equity share capital (as defined in section 548 of the Companies Act) of such undertaking; or (b) the relevant partnership interest;

Subscription Agreement

the subscription agreement to be entered into prior to the Effective Date and made between the Offeror, Penta, Toscafund, Tosca Penta Jersey Fund and Tosca Penta LP Fund;

subsidiary, subsidiary undertaking and undertaking

shall be construed in accordance with the Companies Act;

Takeover Offer

if the Acquisition is implemented by way of a takeover offer, as defined in Chapter 3 of Part 28 of the Companies Act, the offer to be made by or on behalf of the Offeror to acquire the entire issued and to be issued ordinary share capital of TalkTalk (other than the Excluded Shares) on the terms and subject to the conditions to be set out in the related offer document and, where the context permits, any subsequent revision, variation, extension or renewal of such takeover offer;

TalkTalk

TalkTalk Telecom Group plc, a company incorporated and registered in England and Wales with company number 07105891 and whose registered office is at Soapworks, Ordsall Lane, Salford, United Kingdom M5 3TT;

TalkTalk Directors

the directors of TalkTalk as at the date of this Announcement or, where the context so requires, the directors of TalkTalk from time to time;

TalkTalk Group

TalkTalk and its subsidiary undertakings from time to time and, where the context permits, each of them;

TalkTalk Shareholders

holders of TalkTalk Shares;

TalkTalk Share Plans

the TalkTalk Discretionary Share Option Plan, the TalkTalk Savings Related Share Option Scheme, the TalkTalk Shareholder Value Plan and the TalkTalk Share Incentive Plan, in each case as amended from time to time;

TalkTalk Shares

the ordinary shares of 0.1 of a penny each in the capital of TalkTalk;

Toscafund

Toscafund Asset Management LLP, a limited liability partnership registered in England and Wales with registered number OC320318 whose registered office is at Ferguson House, 15 Marylebone Road, London NW1 5JD;

Tosca Investors

Tosca Opportunity, Tosca Mid Cap, The Pegasus Fund Limited, TEMF Ltd, Tosca Service III LP, Tosca Select LP and Tosca Recovery Select SPV, each advised by Toscafund;

Tosca Penta

together, Toscafund and Penta;

Tosca Penta Jersey Fund

Tosca Penta IOM Limited, a company incorporated and registered in Jersey with company number 132691 and whose registered office is at Second Floor, No 4 The Forum, Grenville Street, St. Helier, Jersey JE2 44F;

Tosca Penta LP Fund

Tosca Penta IM Investments LP, a Scottish limited partnership with registered number SL034731 and whose principal place of business is at 150 St. Vincent Street, Glasgow G2 5NE;

United Kingdom or UK

the United Kingdom of Great Britain and Northern Ireland;

US or United States or USA

the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia;

US TalkTalk Shareholders

TalkTalk Shareholders who have a registered address in the US, or who TalkTalk or the Offeror reasonably believes to be citizens, residents or nationals of the US, including any custodian, nominee or trustee holding TalkTalk Shares for persons in the US or with a registered address in the US;

US Exchange Act

the US Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

US Securities Act

the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;

Voting Record Time

the time and date by reference to which entitlement to vote on the Scheme will be determined, as specified in the Scheme Document;

Wider Offeror Group

the Offeror and its parent undertakings and its and such parent undertakings' subsidiary undertakings, the Tosca Investors and the New Tosca Penta Funds and their respective associated undertakings, and any other body corporate, partnership, joint venture or person in which the Offeror and all such undertakings (aggregating their interests) have a Significant Interest but excluding, for these purposes, TalkTalk;

Wider TalkTalk Group

TalkTalk and its associated undertakings and any other body corporate, partnership, joint venture or person in which TalkTalk and all such undertakings (aggregating their interests) have a Significant Interest;

£ or pounds or pence

the lawful currency of the United Kingdom from time to time; and

$, US$ or US Dollars

the lawful currency of the United States from time to time.

All references in this Announcement to any statutory provision or law or to any order or regulation shall be construed as a reference to that provision, law, order or regulation as extended, modified, replaced or re-enacted from time to time and all statutory instruments, regulations and orders from time to time made thereunder or deriving validly therefrom.

References to the singular include the plural and vice versa where the context permits.

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