iiNet directors say price of TPG deal trumped other worries
- 23 March, 2015 14:25
Directors on the iiNet board defended the ISP’s proposed acquisition by TPG in conference calls today with investors and media.
TPG announced its planned $1.4 billion acquisition of iiNet on 13 March. The acquisition, which will boost TPG's broadband customer base to more than 1.7 million, received unanimous support of iiNet's directors.
The deal is not yet complete, with iiNet shareholders expected to vote on the acquisition in June. The acquisition is also subject to court and regulatory approval by the Australian Competition and Consumer Commission (ACCC).
On a media call today, iiNet chairman Michael Smith and CEO David Buckingham played defence after founder and former chief executive Michael Malone reportedly called on shareholders to reject the deal.
“We believe that it’s in iiNet’s shareholders’ best interest that they accept the offer presented in the absence of a superior proposal,” Smith said.
Smith declined to predict how shareholders would vote this June. However, he said it’s hard to argue against the price of the acquisition.
“To quote one who’s mentioned concerns about the deal, it’s a stunning price,” he said.
“The board’s obligation in this is fundamentally we have to deal on the question of value and then do all we can to sort of look after the company, the shareholders, the customers and things like that.
“The [negative] comments that some shareholders are making I think … go to the fact they are worried about the future of the company more than they go to price.”
Smith acknowledged uncertainty about whether TPG will maintain iiNet’s open business culture.
“You can’t be part of this company without becoming personally involved with the people and the way it operates,” he said. “Whatever we might like to think, there’s clearly some risk about [cultural conflict] regardless of who the purchaser is … I can’t pretend for a moment that we’re not seriously concerned about it, as anybody in a business like this would [be].”
Even if shareholders accept the deal, the ACCC will have to decide whether the deal supports competition.
While some have raised concerns about consolidation in the telecom market hurting competition, Smith said he believes the combination of TPG and iiNet will be a powerful force against market leader Telstra.
“This does create a formidable competitor, particularly to Telstra,” he said. “I think NBN itself and Telstra and the other large players sort of will make for a more competitive market with this company, and should it evolve, I certainly see it as pro-competition.”
This idea that the deal supports competition has also been argued by Vodafone, a competitive telco in the Australian market.
Buckingham said iiNet will continue to be an advocate for telecom competition before the Australian government.
“As long as iiNet continues as the brand it is, I’m pretty confident it will have a strong continuing voice in the regulatory environment.”
The iiNet board remains open to better offers, but hasn’t received any so far, said Smith. “The terms of the agreement do not prevent anyone from putting forward a competing proposal,” nor do they stop iiNet from considering another offer, he said.
“We’re well aware of who the potential acquirers of iiNet are, and we’ve had various informal and incomplete discussions with a number of parties in the past.”
The iiNet directors said they are optimistic that TPG will do well owning iiNet. “They’re not going to run it into the ground,” said Buckingham.
TPG has said it will keep the iiNet name as a “premium brand” after the acquisition.
Smith apologised for not notifying shareholders about the proposed deal earlier. “I apologise for this delay if it’s caused issues for anyone, but given the scheme will not take place until June 2015, we felt we needed to attend to other matters related to the offer last week … and we would be looking to shareholder communications this week.”
The iiNet officials would not say whether the deal’s announcement precipitated the departure of the company’ CFO Michael Howard after one week on the job.