Firm advises on $1.6bn bid for net domination

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A major firm has advised on the latest bid for iiNet and a $245m takeover deal in New Zealand by an internet service provider.

M2 Group’s $1.6bn all-share bid for iiNet competes with TPG’s March bid, which valued the Internet service provider at $1.4bn.
News of the bid, which was leaked over the weekend, continues the company’s rapid expansion, comes days after the company’s $245m acquisition of New Zealand’s third largest internet service provider, Call Plus Group.

Allens partner Mark Malinas, who headed up M2 Group’s advisory team on both transactions, said the Call Plus Group takeover took just over two weeks from beginning to end.

“It’s their biggest foray into New Zealand. They are acquiring the third largest telco over there; it changes their standing in that market,” said Malinas.  “This acquisition clearly is a growth opportunity because it’s a new market that they are expanding into.”

Malinas predicts further consolidation among smaller Internet service providers in Australia to continue into next financial year. He anticipates that M2 Group, the owner of Dodo and iPrimus, will be looking to expand further.

“There is still growth potential for them in Australia obviously because they’re the fifth or sixth biggest telco in this market, and they want to grow,” he said.

With some smaller telcos lacking the scale to cope with higher wholesale prices driven by the NBN, greater consolidation of local Internet providers may be on the cards.

The Sydney Morning Herald yesterday reported that the result of iiNet’s sale could put Singtel-Optus, as Australia’s second largest Internet provider in terms number of subscribers, in third place, sparking interest around whether Singtel-Optus will be the next telco to put in a bid for iiNet.