iiNet seeks to soothe shareholders

Takeover target iiNet has responded to growing opposition from shareholders to the agreed $1.4 billion cash bid from suitor TPG Telecom by arranging a raft of investor meetings this week to try to make sure the deal goes ahead.

The move, including an investors conference call today, highlights increasing concern among iiNet's board, chaired by Michael Smith, that dissident shareholders may block the TPG takeover, which is structured as a scheme of arrangement.

Although the $8.60 a share offer from TPG has been widely recognised as including a big premium - iiNet puts the premium at 33 per cent when including its shareholders' right to a 10.5c dividend - there appears to be disappointment in some quarters at the lack of a scrip alternative.

The fact TPG's share price has risen sharply since the iiNet takeover was announced has also given rise to ammunition from some of the Perth target's investors who say the deal was hastily agreed, and more supportive of the suitor.

The AFR reported last week that investors representing more than 14 per cent of iiNet were disappointed in the valuation and may not vote in favour of the TPG deal.

iiNet founder Michael Malone, who quit the company a year ago but remains a sizeable shareholder, has described the TPG deal as "this is the right time".

Under the takeover deal structure, the TPG offer needs to be approved by 75 per cent of votes cast and 50 per cent of the number of shareholders who vote at a meeting likely to be held in late June.

Given that it is rare for more than 70 per cent of a company's shareholders to vote, the scheme conditions on votes cast and supportive voters is crucial.

Singtel-owned Optus and Vodafone have been listed as possibly interested counter suitors, assuming they pass the muster of the Australian Competion and Consumer Competition which is already proving the impact of the proposed TPG-iiNet deal.