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TPG Telecom’s proposed acquisition of iiNet has moved forward another step, with the issue of a scheme booklet laying out details of the proposal, including the independent expert’s finding that the scheme is fair and reasonable.However, while the proposal is set to be put to iiNet shareholders, the Australian Competition and Consumer Commission (ACCC) continues to assess potential competition issues that could arise from the acquisition.
Having called for further comment as it continues to weigh its potential impact on the market, the ACCC will announce its final decision on the acquisition on August 20.
In announcing release of the scheme booklet, which is expected to be sent to iiNet shareholders in the coming days, iiNet chairman Michael Smith reiterated the board’s support for the proposal following the green light from the independent expert, Lonergan Edwards & Associates.
“This is an offer that the board is very happy to present to shareholders for their approval, and represents excellent value for our investors,” Smith commented.
“The independent expert has confirmed that the value offered for iiNet takes into account both a control premium and a substantial share of future expected synergies. The $9.55 headline price is close to the top of its valuation range.”
TPG’s offer of $9.55 per iiNet share incorporates a $0.75 special dividend, with TPG also proposing a capped scrip alternative of 0.969 TPG shares for each iiNet share held by shareholders that elect to roll over their holdings.
In response to a competing proposal from M2 Group, TPG had lifted its original offer by almost a dollar, with TPG’s original proposal comprising cash consideration of $8.60 per share.
The independent expert found that on a risk-adjusted basis the proposed scheme with TPG is a superior proposal to the M2 proposal, which has been withdrawn.
“Entering a competitive bid scenario increased the value our investors can realise, in part by having a higher portion of expected future synergies paid to our shareholders,” Smith stated.
“In the absence of a superior offer, and subject to the independent expert maintaining its conclusion that the scheme is in the best interests of iiNet shareholders, all of the iiNet board unanimously recommends shareholders vote in favour of the scheme.”
In a letter to iiNet shareholders accompanying the scheme booklet, TPG chairman David Teoh stated TPG considers the iiNet and TPG businesses to be “highly complementary in terms of geographic presence, market segments and corporate customer base”.
“The combined businesses will provide broadband services to over 1.7 million subscribers and will be well-positioned to deliver scale benefits in an NBN environment,” Teoh stated.
“TPG acknowledges that the value of the iiNet business is a result of the high levels of customer service provided by iiNet staff and for this reason intends to maintain the iiNet brand as part of a dual brand strategy. Moving forward, TPG intends to preserve and foster this key strength.”
The scheme meeting is set to be held on July 27.
