iiNet, TPG mega-merger wins shareholder approval

iiNet shareholders have voted in favour of TPG’s $1.56 billion-dollar takeover, bringing the two close to creating a new Australian telco giant.

While the deal is still subject to ACCC and court approval, it appears shareholder concerns have been largely overcome. More than 95 percent of shareholders voted in favour of the deal, despite previous reservations from shareholders and remaining concerns from consumer watchdog ACCC.

Today’s vote follows a months-long battle for ownership by TPG, which competed against a bid from M2 valuing the company at around $1.6 billion. The ACCC has also voiced concern about consumer price rises and reduced customer service levels.

iiNet shareholders will receive either $8.80 per iiNet share, or 0.5533 TPG shares and $3.77 per iiNet share. In addition, they will receive a special dividend of 75 cents per iiNet share.

The vote was a “very significant day in the proud history of iiNet”, said the telco’s chairman Michael Smith in a statement released before the vote. The combined company would service 1.7 million customers and will have revenues of approximately $2.3 billion.

The bidding process was evidence of “how valuable iiNet has become to national players in the telecommunications sector as the industry heads towards an inevitable consolidation phase,” he stated.

“It’s clear we have built a business with a brand, customer base and reputation for customer service that a number of key players in the industry would like to own,” Smith stated.

If remaining conditions are satisfied and court approval given, iiNet expects the shares will be transferred to TPG and payment dispatched to iiNet shareholders on 7 September. The 75 cent special dividend is dependent on iiNet receiving a tax ruling from ATO that is acceptable to iiNet and TPG. iiNet expects that it will receive that ruling.

TPG has previously indicated it will retain the iiNet brand.

The ACCC will deliver its verdict on the proposed acquisition on 20 August. While the watchdog has previously suggested the deal won’t affect wholesale competition, it has raised concern publicly about the effect the acquisition might have on consumer prices and customer service.

Following the ACCC decision, iiNet will seek approval from the Federal Court on 21 August.

The road to approval

The battle to takeover iiNet has been a contentious process, with high profile iiNet shareholders initially expressing reservations over the initial $1.4 billion offer first announced in March. Founder Michael Malone came out publicly against the initial deal, indicating concern over its impact on customers and staff.

That offer was countered by M2, which put forward a share proposal valuing the company at around $1.6 billion, plus potentially more once earnings synergies were added.

TPG eventually won-over the iiNet board with its current $1.56 billion-dollar offer, submitted in May.