iiNet gives TPG opportunity to match M2 acquisition offer

iiNet’s board has completed an initial analysis of M2’s offer

The board of Internet service provider iiNet has formally offered TPG the opportunity to submit a counter-bid to M2’s acquisition offer.

TPG announced in March that it had approached iiNet with an acquisition offer. TPG is offering $8.60 cash per iiNet share.

M2 revealed earlier this week that it had submitted a counter-offer for the ISP.

Under M2’s proposal, iiNet shareholders would receive .803 M2 shares per iiNet share ($9.25 per share at M2's closing price on 24 April). They would also receive $0.75 cash per iiNet share. In addition, M2 estimated synergies of $1.37 would accrue to iiNet shareholders.

Under both proposals, the iiNet brand would be retained.

iiNet said this morning that it had completed due diligence enquiries and issued a notice to TPG that will allow them to submit a revised offer for the ISP.

“Following its analysis, the iiNet Board considers the value premium of the M2 Offer under the range of scenarios reviewed, relative to the TPG Offer, is sufficient to enable the iiNet Board to issue the Relevant Notice to TPG and commence the matching right process,” a statement issued by the ISP said.

“We have to recognise that evaluating the M2 and TPG proposals requires careful analysis given TPG is offering cash and M2 is offering shares in a significantly enlarged telecoms company,” iiNet chairperson Michael Smith said.

“There is some judgment required on our part; however we do believe that based on the terms currently in front of us, the M2 proposal warrants triggering the matching right process with TPG.

“Trading of iiNet shares on the ASX since M2’s announcement of the proposal on 27 April 2015 and the majority of analyst commentary has been consistent with that view.”

Without pre-empting any response from TPG, they have a right to submit a revised proposal in the coming days,” Smith said.

“Once we know their position, we will provide a recommendation to shareholders as to which proposal we believe they should support. Ultimately, it will be up to shareholders as to whether they accept the offer the board recommends.”

TPG has three days to submit a counter proposal. M2 has set a deadline of 6 May for iiNet to enter a scheme implementation agreement to begin the acquisition process.

“M2 is pleased that the iiNet Board has now made this decision and that iiNet acknowledged the value premium embedded in the M2 offer plus the potential value of synergies,” M2 chairperson Craig Farrow said.

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