Australia internet provider iiNet could face $1 bln bidding war
By Byron Kaye SYDNEY (Reuters) - Australian telecommunications firm M2 Group Ltd said it proposed to buy Internet service provider iiNet Ltd for A$1.6 billion ($1.3 billion), trumping an approach by rival TPG Telecom Ltd and raising the prospect of a bidding war. Buying Perth-based iiNet, which has about 1 million subscribers, will help either company become Australia's second largest internet provider after market leader Telstra Corp Ltd. Any deal would also put pressure on Singapore Telecommunications Ltd's Australian unit Optus, which is currently in the second largest internet provider. "I expect Optus would be immediately running the numbers on whether a bid for iiNet could work," Rivkin Securities investment director Shannon Rivkin said in a note to clients. "TPG Telecom can certainly afford to pay more and we'd be shocked if they don't come back with a new offer," she added. Broadband internet has been one of the fastest growing sectors of Australia's A$40 billion telecomms industry but smaller players like TPG and M2 have recently turned to acquisitions to fuel growth as nearly 90 percent of homes have internet access. Shares in iiNet closed at a record high of A$9.80 on Monday after M2 said it had made the initial shares-plus-cash indicative offer, which amounted to A$10.00 a share, higher than TPG Telecom's A$8.60-per-share cash proposal which totalled A$1.4 billion. The shares traded higher than iiNet's indicative price, suggesting investors expect TPG Telecom will return with a sweetened proposal. In a statement, iiNet confirmed it received an approach from M2. If it endorses the M2 non-binding offer, TPG Telecom has three days to come back with another proposal. If that fails to materialise, the company said it would recommend M2's proposal to shareholders. TPG Telecom, which appointed Macquarie Capital to advise it on the deal, declined to comment. Optus owner Singapore Telecommunications (Singtel) was not immediately available for comment. ($1 = 1.2767 Australian dollars) (Reporting by Byron Kaye; Editing by Edwina Gibbs and Miral Fahmy)
