ASX 200 drops, Telstra falls, Altium declines

Telstra, Altium and Nick Scali were all in the news for potential acquisitions.

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The S&P/ASX 200 Index (ASX: XJO) fell by around 0.9% to 7,286 points.

Here are some of the highlights from the ASX:

Telstra Corporation Ltd (ASX: TLS)

The Telstra share price dropped by around 0.3% today. However, this was less than the drop of the ASX 200.

In a response to a story in The Age/Sydney Morning Herald, Telstra confirmed it has been in discussions about a potential deal to make an investment in a telecommunications company, Digicel Pacific in the South Pacific region in partnership with the Australian Government.

Digicel is a leading provider of communications services across Papua New Guinea, Fiji, Nauru, Samoa, Tonga and Vanuatu. In the 2020 calendar year, Digicel Pacific made earnings before interest, tax, depreciation and amortisation (EBITDA) of $235 million.

Telstra said the discussions are incomplete and there is no certainty that a transaction will proceed.

The ASX 200 telco said that it was initially approached by the Australian Government to provide technical advice about Digicel Pacific which is a commercially attractive asset and critical to telecommunications in the region. The company said that if Telstra were to proceed with a transaction it would be with financial and strategic risk management support from the government.

In addition to a significant government funding and support package any investment would also have to be within certain financial parameters with Telstra’s equity investment being the minor portion of the overall transaction.

Altium Limited (ASX: ALU)

The Altium share price dropped by more than 4% today on takeover talk.

In an official ASX release, the ASX 200 electronic PCB software business said that in response to media speculation, it hadn’t received any further offer from Autodesk.

That media reporting, such as by the Australian Financial Review, said that Autodesk had come back to Altium to talk about an offer of $40 per share. But those discussions at $40 per share was still reportedly not enough for Altium to be interested.

The AFR reported that an Altium spokesman said:

We are not commenting on matters with Altium but can confirm that acquisition discussions have ceased at this time.

Nick Scali Limited (ASX: NCK)

The Nick Scali share price went up more than 4% today on speculation news regarding a potential acquisition.

It confirmed that it’s in non-exclusive discussions with Greenlit Brands regarding a potential deal to buy Plush, the furniture business.

Nick Scali pointed out that it’s actively considering acquisition growth opportunities from time to time. Management are thinking about the strategic rationale, available synergies, financial impact and the long-term value created for Nick Scali shareholders.

The company said there is no certainty that these discussions, which are ongoing, will result in a transaction for Plush.

If the deal were to go ahead, Nick Scali said it expects it would fund this deal with a combination of cash on hand and debt.

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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium and Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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