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iiNet confirms ihug plans

PERTH-BASED ISP iiNet Ltd has confirmed plans to sell its New Zealand business, ihug Ltd, confirming speculation first reported in WA Business News two months ago regarding the subsidiary, which could be worth at least $30 million. iiNet executive chairman Peter Harley said in a release to the Australian Stock Exchange that his company had received a large number of unsolicited approaches to purchase its subsidiary. Capital raised from the sale would be applied to funding further growth of iiNet in Australia and reducing gearing levels. There had been mounting speculation that the sale of the ihug business could be imminent following a strategic review of the company after it laboured under a five-week trading halt following discrepancies in its financial reporting. The suggestion from those in the market is that the New Zealand business could be worth at least $30 million, based on its $6 million EBIT contribution to the group. Both ihug and iiNet started from humble beginnings in the garages of their respective founders. ihug cost iiNet $30.1 million in cash and a further 23.7 million shares in iiNet in October 2003 – boosting iiNet’s presence in the east coast as well as giving it a trans-Tasman foothold. ihug is now New Zealand’s third largest ISP. The sale process is expected to be completed by the end of 2006.

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