TPG plans to buy iiNet for around $1.4bn

TPG Telecom has revealed plans to buy iiNet in a deal worth around $1.4 billion, becoming Australia’s second largest fixed-line operator.

TPG has proposed to pay $8.60 per share for the 93.75% of iiNet it does not yet own. The deal would value iNet’s equity at roughly $1.4 billion.

As well as the cash price, TPG would honour iiNet’s commitment to pay a $0.105 dividend to existing shareholders, giving the deal a total value of $8.705 per share.

The offer price represents 31% premium on iiNet’s last closing price on 11 March, before the deal was announced. The $8.705 offer also represents iiNet’s highest trading price ever.

A merger would increase TPG’s broadband subscriber base to over 1.7 million customers and create a company with pro forma combined revenues of $2.3 billion.

TPG would become Australia’s second-largest fixed broadband operator - a position currently narrowly held by Optus - and be in a position to take on incumbent Telstra. TPG would also gain iiNet’s over 60,000 NBN and fibre subscribers and its network of over 450 DSLAMs.

Competition regulator ACCC has announced that it plans to conduct a public review of the proposed merger once both companies submit their proposals, and will call for submissions from competitors and other stakeholders once they are lodged.

Financial analysts interviewed by Fairfax Media said the offer price seems fair but speculated that Optus may submit a counteroffer, driving up the acquisition price.