M2 launches rival $1.87b bid for iiNet
UPDATE 2.15pm: M2 Group, the owner of the iPrimus and Dodo telco brands, says it intends to keep iiNet’s namesake brand if its $1.87 billion scrip-and-cash takeover bid of the Perth rival is successful.
In a surprise twist to the iiNet takeover saga, M2 said this morning it had made an approach to the Perth rival’s board to merge and create Australia’s second-biggest broadband services group.
M2 values its bid at $11.37 per iiNet share, though it includes a premium to reflect the suitor’s expectation of saving $60 million from putting the two companies together.
Shareholders of iiNet, M2 argues, would therefore benefit from the synergies because they would remain big equity holders in the merged group.
The terms of the proposed bid, which remains non-binding, would see M2 offer 0.803 of its shares plus 75c cash per iiNet share, for a combined total of $10 a share.
The expected synergies have been valued at $1.37 a share for iiNet shareholders.
In nominal terms, the M2 offer easily trumps TPG Telecom’s agreed $8.60 cash offer for iiNet, which is structured as a scheme of arrangement and still needs a supportive vote from the target’s shareholder.
M2 will offer iiNet two board seats, reflecting that iiNet shareholders would own 42 per cent of the enlarged group.
Shares in iiNet soared $1.14, or 13.16 per cent, to $9.80 by the close in response to M2’s announcement.
The Perth target confirmed today it had received the “unsolicited, non-binding, indicative, incomplete and confidential competing proposal" last Tuesday.
The company said it had informed TPG of the rival bid and would now carry out due diligence of the M2 proposal.
Addressing investors this morning, M2 chief executive Geoff Horth said: “We believe the offer we have put forward is compelling and superior.
"We think it is a realistic and achievable synergy benefits,” he said.
“We have a strong track record of acquiring and integrating assets.
“In all those circumstances we have maintained the brand and invested in growing the brand and enhanced its market strategy and core offering.
“We absolutely value the iiNet brand ethos, in some respects we are envious. We do believe there are things for us to learn.
“The reality is we have done a very good job of not just extracting synergies from the acquisitions we have done but we have been very effective in taking people on the journey and learning from the acquisitions we have made.”
M2 shares were off 62 cents, or 5.38 per cent, to $10.90.
