The TPG Telecom Ltd (ASX: TPM) share price has been a strong performer on the S&P/ASX 200 Index (ASX: XJO) on Wednesday.
In afternoon trade the telco’s shares are up 5% to $7.64 following the release of its merger scheme booklet.
What did TPG Telecom announce?
Late on Tuesday TPG released its scheme booklet for the proposed merger with Vodafone Australia. This follows the receipt of FIRB approval earlier this month.
Should the merger be approved an implemented, TPG shareholders will own 49.9% of the merged company, with Vodafone Australia shareholders owning the remaining 50.1%.
TPG shareholders will also receive a dividend if the merger goes ahead. The company’s board revealed that it intends to pay a fully franked cash special dividend prior to the implementation of the scheme for those that hold shares on the special dividend record date.
At this point the amount of the dividend and the record date are unknown. But further details will be released at least 10 days prior to the scheme meeting on June 24.
A note out of Goldman Sachs today reveals that its analysts believe the dividend could be as high as 67 cents per share.
They commented: “Based on our current FY20E Net Debt estimate of A$1,688mn for TPM and the previously published estimate of $200mn in Singapore funding/Transaction costs, we calculate TPM would have capacity for up to a 67c fully franked potential special dividend (A$813mn franking credits at FY19).”
Demerger plans.
TPG also advised that it intends to undertake a separation of its Singapore business. This will see the business listed on the ASX under the name Tuas Limited and with the ASX ticker code “TUA”.
The company explained that all of the shares of Tuas Limited will be distributed to TPG shareholders. Further details on this separation will be despatched to shareholders on or around May 25.
Should you invest?
While I still have a preference for rival Telstra Corporation Ltd (ASX: TLS) at current prices, I do think this merger makes TPG Telecom a force in the industry and an interesting option for investors.
The special dividend certainly will be a nice bonus for shareholders, but it is unclear at this stage just what it will pay. In light of this, I wouldn’t rush in purely for that until more is known.
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More reading
- ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
- 3 safe and strong ASX dividend shares to buy right now
- Macquarie picks the best stocks to buy for the post COVID-19 rebound
- 2 ASX 50 shares for retirees to buy right now
- 2 ASX shares I would buy for growth and income
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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