M2 Group (ASX:MTU) has launched a $1.85bn counterbid to purchase the Perth-based company iiNet (IIN). Under M2’s deal, iiNet shareholders would receive .803 M2 shares per iiNet share, in addition to 75c per share through a special dividend. The company gave a valuation of its deal, including synergies, at a 32.2 per cent premium compared to TPG’s deal. The company’s estimated “enterprise value” of its deal comes in around $2.25bn. The deal’s $11.37 per share offer gives a value of around $1.85bn to the Perth-based company. The deal also noted a $1.37 per share “value of estimate synergies that would accrue to iiNet shareholders, who would own approximately 42 per cent of the enlarged M2 Group.” Although the value of the synergies may be uncertain before the merger completes, M2 says its offer excluding the synergies is still worth about $10 per share, or 16 per cent higher than TPG’s offer.
The offer comes less than two months after TPG Telecom (ASX:TPM) offered $1.40bn to buy iiNet in an all-cash offer. TPG currently owns 6.25 per cent of the company already. Shares of IIN jumped significantly after the TPG offer, but the deal met resistance from many notable figures. The targeted company’s founder, Michael Malone, called the deal “incomplete, unprofessional and its poor diligence.” Either deal would create Australia’s second largest internet service provider. Board members of iiNet said it had been considering the deal over the weekend. “If the iiNet Board determines that any counter proposal from TPG would be more favourable, or at least no less favourable to iiNet and its shareholders than the Competing Proposal from M2, then the iiNet Board will recommend the revised TPG Counter Proposal, subject to no superior proposal emerging.”
Shares of IIN have jumped again after the second proposal. IIN is up $1.04, or 12.01 per cent, at $9.70 per share around 1:22pm on Monday. IIN has advanced over 34 per cent in the last 12 months and over 23 per cent so far this year.