iiNet takeover war: TPG strikes back

The fight between M2 and TPG over creating Australia's second-largest telco has heated up again, with the iiNet board this morning backing a new counter offer from TPG for the company.

TPG has upped its original offer to iiNet for the takeover, including a new optional offer for shares in TPG for iiNet shareholders.

The offer is for AU$9.55 per iiNet share, including a AU$8.80 cash or scrip consideration, and AU$0.75 cash.

iiNet chairman Michael Smith said the TPG alternative bid offers more certainty and flexibility for shareholders.

"The board has weighed up both offers, and given careful consideration to the merits of a primarily cash-based offer to one which predominantly comprised scrip. We believe the revised cash offer of AU$9.55 from TPG is favourable to M2's predominantly scrip offer," he said in a statement.

iiNet shareholders will be able to opt to receive cash or TPG shares. If they opt for shares, they will receive 0.969 TPG shares per iiNet share, with a cap of 27.5 million total TPG shares to be handed out.

The iiNet board has valued this as a better offer than M2's counter bid last week, which involved swapping 0.803 M2 shares for each iiNet share, plus a AU$0.75 special dividend.

The iiNet board found that there was more certainty in the cash offer from TPG than the M2 bid, and that the returns on the M2 bid were dependent on a successful integration of M2 and iiNet.

The board also said that both TPG and M2 have indicated intentions to retain the iiNet brand, and the associated high level of customer service.

M2 has said that if its offer is not accepted by 5pm AEST on Wednesday, then the offer will be withdrawn. iiNet said it now expects the offer to be withdrawn; however, M2 said in its bid for the company that it reserves the right to submit another bid.

If the TPG takeover goes ahead, it is not expected to be implemented until August. iiNet will be holding a briefing with investors and media at midday AEST on Wednesday.

It comes as TPG is seeking to block rival telco Vocus merging with Amcom. The company upped its stake in Amcom to 19 percent last week, and intends to use its stake to vote against any takeover. The company has said it does not intend to make a counter bid against Vocus.

There had been some concern that TPG could use its existing shareholding in iiNet to block M2's takeover had the iiNet board sided with M2's bid.