Internet service provider iiNet has agreed to buy AAPT's consumer operations for up to $60 million from Telecom New Zealand, edging out rival TPG.
The deal will also see Telecom NZ sell down its 17.4 per cent holding in iiNet to institutional investors, The Australian reported today.
Telecom NZ will sell off its stake in AAPT's retail operations after it failed to attract a buyer for AAPT's whole of business, the paper said. Telecom New Zealand's asking price for the retail and wholesale arms was reportedly $300 million.
iiNet halted share trading on the ASX yesterday, fuelling speculation of a new acquisition. iiNet shares last traded at $2.65.
The acquisition of AAPT is likely to solidify iiNet's position as number three ISP in the Australian market — a position hotly contested by rival ISP, TPG.
Both TPG and iiNet have been in a buying frenzy to solidify their positions in the Australian broadband marketplace. TPG's parent company acquired Pipe Networks last year for $373 million. iiNet's recent purchase history includes the acquisition of Netspace and Westnet.
The deal will bring about 113,000 broadband subscribers and over 251,000 other active telecommunications services to iiNet. The provider will now have more than 652,000 broadband subscribers in total, with over 1.32 million active services. iiNet expects that it will migrate about 25,000 subscribers onto its own network.
As part of the deal, iiNet will ink a new wholesale arrangement with AAPT to use the company's network. The AAPT brand will not be acquired as part of the deal. That will remain with the Telecom New Zealand subsidiary, which will now focus on the business and wholesale markets, according to a statement issued today by Telecom.
In general, iiNet expects the deal to bring in "post-synergies" earnings before interest, depreciation, taxation and amortisation (EBITDA) of $20 million in the first full year after the acquisition — which comes in addition to its $10 million EBITDA expected contribution from Netspace in the 2011 financial year.
Updated at 1:00pm, 30 July 2010: Additional details of the deal were provided.