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Australia's iiNet accepts $1.2 billion takeover from TPG Telecom

Staff writer |
Australian Internet provider iiNet accepted a takeover proposal worth A$1.56 billion ($1.2 billion) from TPG Telecom, sidelining rival bidder M2 Group and paving the road to become the industry's second largest firm.

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Sydney-based TPG Telecom raised its indicative cash offer to roughly equal the stock informal offer of Melbourne-based rival M2. TPG Telecom had initially offered A$1.4 billion for iiNet.

The planned deal, which M2 could still disrupt with a higher proposal, would create the most serious rival to Telstra as Australia's internet companies rush to grow amid the roll out of the state-funded National Broadband Network (NBN) which will bring high-speed Internet to 90 percent of homes by 2021.

iiNet has become a prized takeover target because it has been winning business in parts of Australia brought online by the NBN. The deal would mean the company has more than one million subscribers, or a third of Telstra's subscribers, in a telecoms market worth A$30 billion.

"I just don't see a world three or four years away, where outside of small niche providers people will be able to survive without... much bigger scale," iiNet David Buckingham told reporters in a teleconference.

"You've got an incumbent that makes more profit than the rest of the sector combined. You need more scale."

iiNet chose TPG Telecom's proposal over M2's, which was slightly higher based on M2's share price in recent days, because the TPG Telecom proposal offered the certainty of cash, chairman Michael Smith told the teleconference.

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