Is it all back on? Carphone offers £275m for Tiscali

First they were, then they weren’t, then everyone thought they might be again but they weren’t but now, finally, Carphone Warehouse is being reported to have made an informal offer of £275m for Tiscali’s UK assets.

This is believed to be way below the price Tiscali had been seeking – it turned down an offer for double the amount this time last year – and there is an outside chance the offer may have to go up, if Sky renews its interest.

Carphone Warehouse had given Sky a clear shot at Tiscali by pulling out of talks to buy the troubled ISP but Sky pulled out last month after effectively finding what Carphone had said all along; for a company in deep financial trouble, Tiscali was expecting far too high a price.

The two ISPs have spent the past few months starting up and dropping out of talks to make a bid for Tiscali. Things are coming to a head now because the ISP, which has been up for sale for several months, recently had it shares delisted from the Italian stock exchange and was accused by its auditors of being far too confident its accounts were in order and showed it was able to carry on trading.

Nevertheless, a temporary stay of execution until June was recently granted after debt renegotiations proved successful, giving the ISP a small window of time to find a buyer.

Although the £250m offer is way under Tiscali’s valuation, analysts are agreed that the ISP will have little choice other than to accept it or hope Sky will come in with an improved offer.

The importance of the deal is that Tiscali’s 1.8m subscribers would make either TalkTalk or Sky leapfrog Virgin Media to become the country’s second largest ISP, behind BT.

Sources close to the deal have told the Financial Times that, given the urgent nature of Tiscali’s finances and June’s looming deadline to pay back heaps of debt, a deal could be agreed within a week and possibly even before or over the weekend.

It is a far cry from last May when Carphone Warehouse offered to pay £550m for its UK assets. Now, a year later, Tiscali is 601m Euros in debt – which is more than three times its annual earnings – and losing 243m Euros per year with its auditors suggesting it can no longer continue as a going concern. It appears the end of the road and Tiscali will have to accept. A bid from Sky cannot be discounted but analysts believe even if Sky made rival offers Tiscali is unlikely to sell, in the UK, for more than the £300m mark, one note issued this afternoon suggests £325m should be the ultimate cut off point.

Tags: BT, Carphone Warehouse, CPW, Sky, TalkTalk, Tiscali, Virgin Media