TPG Telecom Ltd (ASX: TPG) shares went up 6.8% and were then halted on news of a potential asset sale.
Asset sale speculation
It was reported in the Australian Financial Review
today that TPG was considering selling its non-mobile fibre assets to Vocus Group.
TPG decided to halt trading of its shares in response to this news being reported.
The ASX telecommunications share noted it has doing a strategic review of its wholesale residential fixed access business, Vision Network, which was announced in October 2022. After that review, TPG received a number of non-binding “expressions of interest” in its fixed network infrastructure assets.
Conditional offer
As part of that process, Vocus made an “indicative, highly conditional, non-binding offer” to acquire certain TPG enterprise, government and wholesale assets, and associated fixed infrastructure assets, including Vision Network, for approximately $6.3 billion.
Some of those conditions include due diligence, debt financing, finalisation of transaction documents and approvals of the boards of TPG and Vocus.
After the TPG board assessed that offer, Vocus Group was granted a period of exclusive due diligence, which is currently set to expire on 6 September 2023.
Discussions between the two businesses are “incomplete” and transaction terms are still going through negotiations.
TPG noted that the board hasn’t made a decision to accept an offer, and there’s no certainty that a transaction will happen, which remains subject to a range of conditions, including relevant regulatory approvals.
What to make of this for the TPG share price?
I think it would be a great move by the company to sell these assets at a good price. The market doesn’t exactly love TPG at the moment. It’s down 13% in the last year, and down 36% since July 2020.
The business has been doing a few positive things such as growing the dividend, returning to subscriber growth, extracting synergies from the merger and investing in 5G. But is that enough?
TPG shares may be undervalued if this deal goes ahead, but I’d rather buy Telstra Group Ltd (ASX: TLS) shares because of the stronger earnings growth profile, more diverse earnings and better market position.
