Australian ISP iiNet has two suitors waiting in the wings and on Thursday called upon one of them – the first to make a takeover offer – to up its bid.
Last month TPG Telecom agreed to acquire 100% of iiNet for A$8.60 per share in cash, valuing it at A$1.4 billion.
However, iiNet announced it had received a counter-bid from M2 Group earlier this week and has now gone back to iiNet to ask it to up its offer. Specifically, it has opened t he matching right process, giving TPG three business days to table a new bid.
M2 said its cash and stock offer values iiNet at A$10 per share, or a 16% premium to TPG’s bid, which puts it at just over A$1.6 billion.
Amongst other things, iiNet said it recognises the value of TPG’s all-cash offer compared with M2’s higher – but predominantly paper-based – bid.
"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," said iiNet chairman Michael Smith, in a statement on Thursday.
"There is some judgement 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," he added.
"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," said Craig Farrow, chairman of M2.
However, Farrow insisted that M2 will not allow the right matching process to be drawn out any longer than necessary.
"If M2 and iiNet do not enter into a scheme implementation deed by 5.00pm (AEST) on Wednesday 6 May 2015, M2’s current competing proposal and associated financing approvals will be withdrawn," he said, while reserving the right to make a new offer in future.
The M2 group provides a range of consumer and business communications services, including fixed voice, broadband, mobile and cloud services, under four different brands: Commander, Engin, iPrimus and Dodo.
It had 1.53 million services in operation, or revenue-generating units, at the end of December, excluding its energy customers.
iiNet reported 795,000 broadband customers at the end of the calendar year, while TPG had 786,000.
