According to one market watcher, Sydney-based Petra Capital, however, M2 is unlikely to make a further offer and it says it believes investors can now discount the chance of another competing bid.
Petra does, however, raise the possibility that the competition watchdog, the ACCC, may look at the deal which would bring together TPG and iiNet – although it says it is difficult to see how the consolidation of the two companies will do anything but increase competition by boosting TPM’s ability to challenge Telstra.
According to the firm’s industrial analyst Michael Henshaw, in assessing the deal, it’s not expected that the ACCC will look at broadband markets in isolation but, rather, as part of the wider home phone/broadband market, “as the majority of residential broadband products are sold as a bundle”.
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“It is argued that the ‘lessening of competition’ rather than markets share per se is the key issue. It is instructive therefore to look at the skewed profitability of the Australian telecoms industry, which provides some insights as to why, in our view, this consideration would be good for competition, by improving TPM’s ability to compete against Telstra,” Henshaw says.
Now, as the market waits to see what M2’s next move, if any, might be, TPG certainly seems to be in the box seat and likely to secure the deal, with the iiNet board yesterday accepting the improved cash and scrip offer by TPG over the offer by M2.
TPG’s improved offer valued iiNet at $9.55 per share compared to its original offer of $8.60 a share, and iiNet shareholders now have the choice of cash or scrip.
In its statement yesterday to the ASX, the iiNet board says it had weighed up both the TPG and M2 offers, and “given careful consideration" to the merits of a primarily cash-based offer to one which predominantly comprised scrip.
And, iiNet Chairman, Michael Smith, said that the certainty of value and the flexibility offered by the scrip alternative in the revised TPG Offer was compelling when evaluated against the M2 Proposal.
