TPG Telecom Edges Ahead of M2 Group, as the iiNet Board Recommends Its Increased Offer

TPG Telecom announced it has made an improved offer to acquire 100% of iiNet's shares, which has been recommended by iiNet's board. Structured as a scheme of arrangement, iiNet shareholders can elect to receive either AUD 8.80 cash or 0.969 TPG Telecom shares for each iiNet share, subject to a 27.5 million share cap. Should the share cap be exceeded, the number of TPG Telecom shares will be scaled back on a pro-rata basis with the balance paid in cash. iiNet shareholders will also be entitled to a fully franked special dividend of AUD 0.75 per share subject to a favourable ruling from the Australian Taxation Office. Should the special dividend be less than AUD 0.75 per share, TPG Telecom will pay the difference in cash. iiNet's Board recommends all iiNet shareholders vote in favour of the revised TPG offer. The total value of the cash offer of AUD 9.55 is similar to M2 Group's bid last month but with the added certainty of a cash alternative, compared with M2's scrip offer. We believe this certainty is integral to the iiNet Board's decision to recommend TPG Telecom's revised offer in favour of the recent M2 offer.