Australian Internet provider iiNet Ltd (IIN.AX) accepted a sweetened A$1.56 billion ($1.2 billion) takeover proposal from larger rival TPG Telecom Ltd (TPM.AX), sidelining rival bidder M2 Group Ltd (MTU.AX) and paving the way for it to become the industry's second largest firm. Sydney-based TPG Telecom Ltd (TPM.AX), controlled by Malaysian-born billionaire David Teoh, raised its indicative cash offer to roughly equal the stock informal offer of Melbourne-based rival M2. TPG Telecom had initially offered A$1.4 billion for iiNet. The planned deal, which M2 could still disrupt with a higher proposal, would create the most serious rival to market behemoth Telstra Corp Ltd (TLS.AX) as Australia's internet companies rush to upsize amid the roll out of the state-funded National Broadband Network (NBN) which will bring high-speed Internet to nine in 10 homes by 2021. iiNet has become a prized takeover target because it has been winning business in parts of Australia brought online by the NBN. The deal would mean the company has more than one million subscribers, or a third of Telstra's subscribers, in a telecoms market worth A$30 billion. "I just don't see a world three or four years away, where outside of small niche providers people will be able to survive without... much bigger scale," iiNet David Buckingham told reporters in a teleconference. "You've got an incumbent that makes more profit than the rest of the sector combined. You need more scale." The current second-largest internet provider Optus, owned by Singapore Telecommunications (STEL.SI), has just under 1 million customers and has been seen as a possible counterbidder. Optus and M2 declined to comment, while SingTel directed inquiries back to Optus. iiNet chose TPG Telecom's proposal over M2's, which was slightly higher based on M2's share price in recent days, because the TPG Telecom proposal offered the certainty of cash, Chairman Michael Smith told the teleconference. Share valuations of Australian telcos have been rising during the NBN roll-out and as more households become hooked on the internet, and Smith added that iiNet risked its valuation shrink to previous levels if it waited any longer. iiNet shares fell 2 percent to A$9.77, higher than TPG Telecom's informal offer of A$9.65, as investors held open the possibility M2 might increase its proposal. M2 shares fell 0.8 percent while TPG shares jumped 5 percent.
Source: http://www.reuters.com/article/2015/05/06/us-iinet-ltd-m-a-tpg-telecom-idUSKBN0NR00320150506
