Internet provider iiNet is set to be scooped up by rival TPG in a $1.4 billion deal described by one analyst as “the worst kept secret” in Australia’s telecommunications sector.
iiNet’s board of directors has recommended shareholders accept the $8.60 per share offer, which is 33 per cent above the company’s five-day average stock price.
“The board views this as a significant reward for shareholders who have shown their faith in iiNet,” iiNet chairman Michael Smith said.
TPG chief executive David Teoh said the deal would create a combined company with 1.7 million subscribers.
“iiNet and TPG are highly complementary businesses in terms of geographic presence, market segments and corporate customer base,” he said.
“The combined businesses will provide broadband services to over 1.7 million subscribers and will be well positioned to deliver scale benefits in an NBN environment.”
IG market analyst Evan Lucas said the deal had been expected for years.
“It’s the worst kept secret … it was always going to happen,” he said.
He said the $1.4 billion price tag was fair for both companies, especially in light of iiNet’s disappointing first half results.
“It’s a good price … it’s not expensive but it’s certainly not cheap.”
iiNet shares lost 11 per cent in one day in February after it reported a flat first half profit.
Lucas said the deal would give TPG, which specialises in low-cost internet, exposure to iiNet’s premium customer base.
If iiNet shareholders approve the deal, the takeover is set to be completed in July.