Australia’s TPG Telecom has agreed to buy the 93.75% it does not already own of local ISP iiNet in a deal that values it at A$1.4bn (US$1.1bn).
The takeover would make TPG the country’s second-largest fixed line provider behind incumbent telco…
Australia’s TPG Telecom has agreed to buy the 93.75% it does not already own of local ISP iiNet in a deal that values it at A$1.4bn (US$1.1bn).
The takeover would make TPG the country’s second-largest fixed line provider behind incumbent telco Telstra, and comes just months after smaller telcos Vocus and Amcom announced a merger.
It is offering A$8.60 in cash per share, and will also pay the company’s planned midyear dividend of A$0.105 a share. The group said it will fund the deal with new debt facilities. It expects TPG’s pro forma leverage to be roughly 3.1x net debt/EBITDA post transaction.
According to TPG, the total value represents a CY14 EV/EBITDA multiple of 9x, as well as a 33% premium to iiNet’s pre-bid share price.
iiNet chairman Michael Smith said: “The board views this as a significant reward for shareholders who have shown their faith in iiNet. The price of A$1.4bn is a very tangible measure of the value that the extraordinary people of iiNet have created through their innovation, brilliant service and capacity to add value.”
The deal comes as telcos reposition themselves as faster broadband services are deployed in the market. Australia is also in the middle of an ambitious rollout of telecom services under its National Broadband Network (NBN) public-private partnership, which aims to reach all premises in the country.
TPG chairman and CEO David Teoh said both companies are highly complementary in terms of geographic presence, market segments and corporate customer base.
“The combined businesses will provide broadband services to over 1.7 million subscribers and will be well positioned to deliver scale benefits in an NBN environment,” he said.
The acquisition will carried out through a Scheme of Arrangement, with iiNet shareholders set to vote on the deal in June.
However, Citi analyst Justin Diddams believes the country’s current number two fixed line player Optus could also be interested in iiNet.
“There’s also scope for a counter offer from Optus, given the strategic importance of [iiNet’s] customer base,” he said in a note to investors.
Optus declined to comment.
TPG hired Macquarie Capital as financial adviser and Minter Ellison as legal counsel. iiNet is being financially advised by Azure Capital, with K&L Gates providing legal advice.
