It seems everyone wants a piece of the Australian Internet provider, iiNet.
Just more than a month after TPG Telecom announced its intention to purchase iiNet, the communications company, M2 Group, has thrown its hat in the ring. According to a report in Fairfax Media, M2 has made a bid for 100% of the Perth-based company, in an all-share deal valued at more than A$1.6 billion.
M2, which owns the Dodo and iPrimus brands, has put a price on iiNet shares of A$11.37. TPG had offered to purchase iiNet shares for A$8.60 each, and A$1.4 billion cash total. Under the M2 deal, iiNet shareholders would receive 0.803 M2 shares plus a $0.75 special dividend for each iiNet share, and around 42% of the enlarged M2 Group. M2 also offered to allow two iiNet directors to join the M2 board.
In a statement released to the Australian Securities Exchange (ASX), iiNet confirmed it had been approached by M2 and said it was in the process of performing due diligence. If the iiNet board decides M2’s proposal is superior, TPG will then have three days to make a counter proposal.
“The process we have put in place has functioned to allow competing, potentially superior offers to be put to the Company. Whilst we will now need to spend some time working through the process, we are confident that the final result will have positive implications for shareholder value,” iiNet Chairman Michael Smith said.
Swallowing up iiNet — which has 975,000 subscribers — would make either TPG or M2 Australia’s second largest fixed-line Internet provider, behind Telstra’s BigPond. As pointed out in Fairfax Media, this would push Singtel-Optus into third place. There are almost 13 billion Internet subscribers in Australia.
iiNet is one of the more popular Australian Internet brands and if M2’s purchase was successful, customers would likely want assurance the company’s standard of service and range of offerings would remain unchanged.
M2 went some way to addressing these concerns, saying in a statement released to the ASX: “M2 intends to operate iiNet as a standalone brand that would be nurtured and grown under the M2 umbrella. M2 fully recognises the value of different brand strategies and intends to leverage the strength of the iiNet brand and its customer ethos.” iiNet and M2 have been approached for further comment.
The Australian Competition and Consumer Commission (ACCC) is reviewing the proposed iiNet and TPG merger, given the significant chunk it would take of Australia’s Internet market. The ACCC could not be reached for comment regarding whether it would also be looking into the potential iiNet and M2 deal.
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