iiNet board swings behind TPG’s new buyout offer

TPG ups offer for ISP after M2 makes competing bid.

The board of Internet service provider iiNet confirmed this morning that it supported a revised acquisition offer by TPG.

TPG’s second offer for the ISP comprises shares or cash; its original offer was cash-only. TPG is offering $8.80 cash or TPG shares and a $0.75 dividend per iiNet share. Shareholders who opt for shares will receive 0.969 TPG shares for each iiNet share.

TPG values the offer at $9.55 per share. Its original offer was valued at $8.60 per share.

The offer implies an enterprise value for iiNet of $1.9 billion.

iiNet and TPG revealed details of the original acquisition bid in March.

The revised offer came in the wake of a competing bid for iiNet by M2. M2 valued its offer at $11.52; however, that was based on $9.25 worth of M2 shares and a special dividend of $0.75 per iiNet share as well as an estimation of $1.37 in synergies that would accrue to iiNet shareholders.

Details of the M2 offer for iiNet were made public in April.

"The iiNet Board has undertaken thorough and extensive analysis of both offers in conjunction with its advisers, and has determined the Revised TPG Offer to be more favourable to iiNet and iiNet Shareholders than the M2 Proposal,” said a statement issued to the ASX by iiNet this morning.

The iiNet board said its reasoning included the certainty of the value represented by the TPG offer, compared to "the inherently uncertain future value of a combined iiNet and M2 under the M2 Proposal”, as well as changes in the pricing of M2 shares.

Read more: iiNet gives TPG opportunity to match M2 acquisition offer

The ability for shareholders to choose whether to receive cash or TPG shares in exchange for their iiNet holdings was a key factor in the board’s recommendation.

Both suitors have indicated they will retain the iiNet brand, the ASX statement noted.

“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,” iiNet chairperson Michael Smith 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.”

M2 previously set a deadline of 5pm today for iiNet to enter into a scheme implementation deed or else it would withdraw its proposal.

iiNet shareholders are due to vote on the TPG offer in July.

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