Telit Communications shares surge on u-blox merger proposal

Media speculation has been corroborated by Telit Communications (AIM:TCM) regarding chatter about a preliminary merger proposal it received from Swiss semi-conductor manufacturer, u-blox (SWX:UBXN).

Under the terms of the proposal, Telit Communications shareholders would receive u-blox shares with a value of £2.50 per Telit share. This, based on the proposal‘s assumptions, would result in shareholders owning around 53% in the combined company.

Telit said that its Board were considering the merger proposal, alongside its financial adviser, Rothschild & Co, and further announcement would be made as further developments emerge.

The company added that the proposal assumes any such merger would be structured as an offer for Telit by u-blox, but added that there can be ‘no certainty’ that the proposal or any similar will be granted. Its statement added:

“In accordance with Rule 2.6(a) of the Code, u-blox is required, by not later than 5.00 p.m. on 18 December 2020, to either announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for the Company, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.”

“This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.”

Following the announcement, Telit Communications shares jumped 17.95%, up to 198.40p on Friday 20/11/20. This price is its highest since 2017, where it peaked at around 371.00p a share, but ahead of its six-month high of 106.00p.

Conversely, u-blox shares dropped by 8.17%, to 53.65 CHF, though still ahead of its year-to-date nadir seen around Halloween, at 45.12 CHF.