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​TPG set to raise AU$300m to pay for iiNet acquisition

TPG plans to use the AU$300 million in raised funds to partly repay its AU$1.85 billion bank debt that has increased as a result of the iiNet acquisition.

TPG has launched a fully underwritten institutional placement and share purchase plan (SPP) in the hope to raise AU$300 million, which it said will be used to partly repay debt from the acquisition of iiNet in order to support ongoing growth capex initiatives, including its fibre network build arrangement for Vodafone Australia, and to minimise the company's overall cost of funding.

In August, TPG was given the green light by the Australian Competition and Consumer Commission (ACCC) and the Australian Federal Court to acquire iiNet in a deal valued around AU$1.5 billion.

Under the deal, TPG acquired 100 percent of iiNet shares, in which TPG paid AU$9.55 per iiNet share, incorporating a AU$8.80 cash or scrip consideration and AU$0.75 cash per share.

As a result of the acquisition, which TPG pointed out during its FY15 results briefing, the company's bank debt rose to AU$1.85 billion. But the company noted that TPG's operations, including the integration of the iiNet acquisition, are proceeding as expected and it will not impact on its FY16 earnings per share.

The placement price per new share will be determined via a bookbuild process, TPG said.

In addition to the placement, a non-underwritten SPP will be offered to eligible shareholders in Australia and New Zealand. Under the SPP, holders of existing TPG shares and those who are eligible shareholders in either country will be invited to subscribe for up to AU$15,000 of new fully paid ordinary shares in TPG per eligible shareholder.

In September, TPG signed a AU$900 million dark fibre deal with Vodafone Australia. TPG is set to construct an additional 4,000 kilometres of fibre to Vodafone's cell towers across the country, outlaying AU$300-400 million in capital expenditure. The 15-year deal, which has been a year and a half in the making, is set to be completed by mid-2018.

At the same time, TPG is set to shift its 320,000 mobile wholesale customer base to Vodafone. Customers will be invited in batches to move over from Optus' network to Vodafone, with TPG chief operating officer Craig Levy stating that the telco will offer data incentives for customers to move, and current users will not need to purchase a new SIM card to shift networks.

The acquisition of iiNet now makes TPG Australia's second-largest fixed-line telco after Telstra, increasing its customer base to 1.7 million.