iiNet recommends improved TPG offer

06/05/2015 - 05:30


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iiNet recommends improved TPG offer

TPG Telecom has quickly won backing from iiNet after lifting its takeover offer to $9.55 per share, with cash and scrip alternatives, as it fends off a rival bid from Dodo owner M2 Group.

Sydney-based TPG has increased the value of its offer from $8.60 cash per share, or $1.4 billion, to $1.57 billion.

The revised offer is pitched at $8.80 in cash or 0.969 TPG shares per iiNet share, plus a 75 cents special dividend per iiNet share, collectively worth $9.55 per share.

The amount of scrip to be issued by TPG to iiNet shareholders will be capped at 27.5 million shares, ensuring TPG chairman David Teoh remains that company's dominant shareholder.

TPG has also advised that it plans to retain the iiNet brand as pat of a dual-branding strategy.

"TPG recognises that the value of the iiNet brand is a product of the high levels of customer service provided by iiNet staff and intends to preserve and foster that key strength," TPG said in a statememt.

The rival scrip-based offer from M2 was valued at $9.67 per share, based on M2's last closing price.

M2 also planned to retain the iiNet brand.

In its response this morning, the iiNet board noted that the value of the M2 proposal had fluctuated between $9.37 per share and $9.67 per share, in line with movements in M2's share price.

It highlighted that TPG's cash alternative delivered value certainty.

"The returns to iiNet shareholders under the M2 proposal would ultimately depend on successful integration of the two businesses and capturing of synergy benefits, as well as the continued trading performance of both businesses and continued valuation metrics in the Australian telecommunications sector," iiNet said in a statement.

It added that "additional upside from synergies under the M2 proposal is likely to be limited, as the iiNet board considers that the majority of value attributable to potential future synergies has been factored into the price premium offered for iiNet shares".

The iiNet board has recommended that its shareholders accept the revised TPG bid, saying it is more favourable to iiNet and iiNet shareholders than the M2 proposal.

It has made this recommendation in the absence of a superior proposal and subject to the independent expert concluding that the revised TPG offer is in the best interests of iiNet shareholders.

iiNet has entered into a revised Scheme Implementation Agreement with TPG on this basis

iiNet chairman Michael Smith said that the certainty of value and the flexibility offered by the scrip alternative in the revised TPG offer was compelling when evaluated against the M2 proposal.

“The board has weighed up both offers and given careful consideration to the merits of a primarily cash-based offer, to one which predominantly comprised scrip," he said in a statement.

"We believe the revised cash offer of $9.55 from TPG is favourable to M2’s predominantly scrip offer.

"iiNet shareholders may also roll over into TPG scrip instead should they wish to do so, subject to the cap on the total number of TPG shares.”

iiNet noted that the value of TPG's scrip alternative had also fluctuated widely, from $9.09 to $10.05, incuding the special dividend, based on share price movements since early March.

At yesterday's closing TPG share price, the scrip alternative was worth $9.27 per iiNet share.


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