Less than 18 months after its flotation in July 1988, the board of National Telecommunications Plc has announced that it will be unanimously recommending shareholders to accept a cash offer made by Alcatel Business Systems Ltd that values the company at around UKP20.4m. Through brokers S G Warburg & Co, Alcatel is offering 60 pence […]
Less than 18 months after its flotation in July 1988, the board of National Telecommunications Plc has announced that it will be unanimously recommending shareholders to accept a cash offer made by Alcatel Business Systems Ltd that values the company at around UKP20.4m. Through brokers S G Warburg & Co, Alcatel is offering 60 pence for each of the ordinary shares in National Telecom, representing a premium of 22% over the market closing price of 49 pence on December 21. Alcatel has already received irrevocable committments to accept the offer from shareholders accounting for 26.5% of National Telecom Ordinary shares. National Telecom, which saw pre-tax losses of UKP1.6m on sales of UKP22.4m for the six months ended September 30, started its ascent to prominence in 1983 as a company with the uninspiring name of Small Systems Engineering, operating out of a garage in North London. The quality and competitiveness of the office telephone exchanges that still, in more sophisticated forms, make up the hub of National Telecom’s business, were enough to tempt Peter Chamberlain out of British Telecom to head the company, and after changing the name to the more impressive-sounding National Telephone Group, he managed to convince John Nash of the venture capitalists Advent to back the product – Nash had previously visited the company in 1982 but was put off by the lack of management skills. With a UKP1m cash injection and a government committed to telecommunications liberalisation, things happened swiftly in the next five years, with subcontraction of manufacturing to the then Thorn Ericsson, the move to new offices in London’s Docklands, and diversification by acquiring Ansaphone and by offering complete turnkey packages for telephone system installation, servicing and maintenance; by this time, turnover had risen to UKP19.5m for the year ending March 31 1988, with pre-tax profits of UKP2.9m. The hugely successful flotation in July 1988, which was 17 times overscribed at a share price of 120 pence, valued the company at UKP29.7m and was followed by acquisitions in the UK and the US, with National Telecom paying UKP7m for cellular telephone and airtime supplier Tactico, UKP3.3m for Solid State Systems, an Atlanta, Georgia-based designer and marketer of digital PABXs, and UKP2.3m for the distributor TVC General Telephones.
Lack of accountability
But by May of this year, it became clear that significant problems had arisen in the key private telephone exchange distribution business, with lack of accountability at middle-management level and deviation from group strategy being cited as reasons for a disappointing net profit of UKP2.2m for the year ended March 31 1989, against market expectations of well over UKP4m. Since then, those profits have turned into losses, and even talks with prospective buyers have not run smoothly, with National Telecom at one point considering a U-turn from its original plan and going it alone. All this meant that with last week’s bid, Alcatel will be buying at exactly half their 120 pence price at the flotation, and well down on the 153 pence it hit just over a year ago. For its part, Alcatel sees the acquisition as providing a UK outlet in the business communications equipment market using National Telecom’s existing distribution channels; National Telecom has already stated its desire to be part of a larger group in order to achieve its ambitious growth plans – among which could be the setting up and running of its own network, an objective hinted at by Chamberlain in happier days. – Mark John