What KCOM takeover means for customers and staff and what happens next?
KCOM installing fibre broadband
By Hull Daily Mail | Posted: 26 Apr 2019
News broke on Wednesday that KCOM had received a £504m takeover offer from a leading UK pension fund.
The internet provider, first launched in 1904 as the Hull Telephone Department, is now expected to be bought by a subsidiary of the Universities Superannuation Scheme (USS).
KCOM provides broadband and telephone services to 140,000 customers and businesses across Hull and East Yorkshire.
But what does the proposed takeover mean for KCOM and what will happen next?
What is the Universities Superannuation Scheme?
The USS was formed in 1975 and is one of the largest private sector pension schemes in the UK.
With assets worth more than £50bn, it is the leading pension scheme for academic staff at universities across the country.
USS has completed a string of high-profile acquisitions over the years.
KCOM supplies broadband to customers across Hull and East Yorkshire (Leo Francis)
It currently owns Moto Hospitality, the company which runs almost 60 motorway service stations, and has investments in Heathrow Airport, Thames Water and a number of shopping centres.
USS is headquartered in Liverpool, in the prestigious Royal Liver Building.
It set up subsidiary Humber Bidco this month, with the intention of buying KCOM.
Why is the USS interested in KCOM?
Mike Powell, head of the private markets group at USSIM, said: "We believe that KCOM is a high-quality business that is well-placed to grow and thrive under private ownership and that is why we have made this compelling offer to shareholders at an attractive premium.
“With the right capital support and assistance, we believe that KCOM's management will be able to enhance the quality of its offering, delivering benefits for customers as well as sustainable, long-term returns.
“USSL's track record as a long-term and supportive shareholder with extensive experience in regulated sectors makes us an ideal partner for KCOM."
What does KCOM think of the £504m offer?
If KCOM’s interim non-executive chairman is to be believed, the £504m offer is considered to be an extremely attractive one.
USS – via Humber Bidco – has offered 97 per share to buy KCOM, and the broadband company’s biggest shareholder Teleios Capital has backed the bid.
Firas Abi-Nassif, co-founder of Teleios Capital, said: “Teleios Capital has been in discussions with KCOM’s management and board over the past two years around strategic alternatives, including a sale of the company.
“As the largest shareholder, we believe this offer represents a positive outcome for the company and all other investors.”
KCOM has launched new business broadband packages (Leo Francis)
KCOM has also commented on the offer.
Patrick De Smedt, interim non-executive chairman at KCOM, said: "The board believes that USSL's offer for KCOM provides, on completion, both meaningful, guaranteed cash returns for shareholders as well as a strong, supportive partner in our endeavours to take the business forward to new successes.
“The board believes that the offer of 97p per share represents a compelling opportunity for shareholders to realise an attractive cash value in respect of their shares and recognises the quality of KCOM's businesses and the strength of their future prospects.
What happens next?
KCOM’s directors have already said they consider the £504m to be “fair and reasonable”.
However, before the takeover can go ahead, the bid must be approved by the company’s shareholders.
Watch: KCOM boss answers your questions
Shareholders have been advised to vote in favour of the takeover. For the deal to go ahead, at least 75 per cent of KCOM’s major shareholders must back the bid.
The acquisition is expected to be completed in mid-2019, subject to shareholders at KCOM backing the sale.
Will KCOM remain based in Hull?
In a nutshell, yes.
In the official takeover offer notice published yesterday, KCOM’s proposed buyer said: “Bidco intends to maintain KCOM's corporate headquarters and headquarters' functions in Hull.
“Bidco does not intend to change the locations of the places of business of the National Network Services and Enterprise businesses… Bidco has no intention to redeploy the fixed assets of KCOM.”
A bit more about KCOM
First launched in 1904 as the Hull Telephone Department, it became Kingston Communications in 1987 when Hull City Council announced plans for the company to be formed.
More than 50,000 people in Hull bought shares in KC when the business was first floated on the London Stock Exchange in 1999.
The popularity of the share sale to the public was so great, demand exceeded the supplies of the stock.
KC was later renamed to KCOM in 2007, when the council sold its remaining stake in the business.