Australian ISP iiNet’s shares soared more than 17% after rival M2 said it had made a competing proposal worth about A$1.6bn (US$1.3bn) to buy the group.
The indicative, non-binding and incomplete offer is higher than the A$1.4bn (US$1.1bn) deal that…
Australian ISP iiNet’s shares soared more than 17% after rival M2 said it had made a competing proposal worth about A$1.6bn (US$1.3bn) to buy the group.
The indicative, non-binding and incomplete offer is higher than the A$1.4bn (US$1.1bn) deal that local player TPG Telecom lodged last month.
iiNet shareholders would receive 0.803 M2 shares, plus a A$0.75 special dividend, for each iiNet share under the new offer. They would end up owning about 42% of the combined group if the scheme of arrangement is successful.
TPG offered A$8.60 in cash per share for the 93.75% of iiNet that it does not already own, on top of promising to pay the company’s planned midyear dividend of A$0.105 a share.
Both combinations would create the country’s second-largest fixed line provider behind incumbent telco Telstra.
iiNet revealed today that M2’s competing proposal was made on 21 April, and that it was still in talks about the terms of the proposed scheme of arrangement.
It said it would give TPG the opportunity to propose a counter proposal if M2’s offer is deemed superior. The target’s board is continuing to recommend TPG’s offer for the time being.
Analysts had been anticipating a counter offer for iiNet, but consensus had fallen on it coming from current number two fixed-line player Optus.
Citi analyst Ross Barrows said there was strong strategic rationale for M2’s bid as it would give it greater scale, adding that there are “few material and strategic M&A opportunities left in the Australian telco market”.
iiNet’s sale comes a few months after smaller players Vocus and Amcom agreed a merger, which would create a company with a A$1.1bn (US$861m) market cap.
M2 signalled it was back on the acquisition trail earlier this month when it snapped up New Zealand’s third-largest ISP Call Plus for NZ$250m (US$188m).
Between 2009 and 2013, the group’s acquisition strategy saw it buy telecoms services firms Dodo & Efftel, Primus Telecom, and Commander.
Goldman Sachs is M2’s exclusive financial adviser for the iiNet deal, with Allens acting as legal adviser.
iiNet hired Azure Capital for financial advice and K&L Gates as legal adviser.
TPG mandated Macquarie Capital as financial adviser and Minter Ellison as legal counsel.
