UK pension fund in £500m buyout of KCOM

Universities pension fund goes to Hull to buy communications minnow

KCOM, the Hull-based communications company that still enjoys a monopoly in the city in which it is based, has agreed a £504 million takeover deal by Humber Bidco, a wholly owned subsidiary of UK universities' pension fund.

The bid, made today at a 34 per cent premium on last night's closing share price, has been recommended to shareholders by the board of KCOM.

"The board believes that USSL's offer for KCOM provides, on completion, both meaningful, guaranteed cash returns for shareholders as well as a strong, supportive partner in our endeavours to take the business forward to new success," said interim KCOM chairman Patrick de Smedt in a statement.

It has also been approved by Teleios Capital and Invesco Asset Management, two of KCOM's biggest shareholders, representing more than one-quarter of the company's shares.

The Universities Superannuation Scheme Ltd (USSL) has £64 billion in assets under management and has a strategy of investing in infrastructure across the UK. It also holds investment in Heathrow Airport, the national air-traffic control system NATS and Thames Water.

KCOM is formerly Kingston Communications, a telecoms operator founded in 1902 by Hull Corporation, later to become Hull City Council, to provide a phone service to the city of Kingston upon Hull.

While Kingston Communications was one of just many municipal phone services founded at the beginning of the 20^th century, the rest were all quickly absorbed into the Post Office Telephone department, later to become BT.

It was granted a monopoly in the city, became the UK's first fully digital network in 1989 using Marconi System X switches, and was floated on the London Stock Exchange in 1999.

In recent years, though, it has struggled. Ambitious plans to expand across the UK with its own fibre network were brought to a close in 2015 when it sold out its network in 24 cities across the UK - outside Hull - to CityFibre in a £90 million deal.

While revenues fell for eight straight years from 2008 to 2016, they nevertheless continued their decline in 2017 and 2018, when the company posted turnover of £301.9 million.

Latterly, the company has sought to focus on corporate customers in East Yorkshire and Hull, providing broadband and cloud services in the region. Virgin Media had also reportedly been interested in acquiring the company, according to the FT.

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