TPG Telecom (TPM) is maintaining pressure on three major rivals across the country in a takeover and a stockmarket raid.
TPG has already made a cash bid for rival iiNet (IIN) priced at $8.75 a share including the final dividend – that has drawn a supposedly higher scrip and cash counter offer from M2Group (MTU) which iiNet directors yesterday lent their support to, in the absence of a higher offer from TPG.
But TPG overnight Wednesday raided Amcom (AMM), lifting its stake from 6.7% to 17.7% and moving into a position where it could block the $1.2 billion merger with Vocus (VOC).
TPG’s raid was executed a week before shareholders are to vote on the merger.
Vocus is not allowed to vote its 10% stake in Amcom, meaning TPG holds the whiphand because the merger has been approved by at least 75% of the voting shareholder base, meaning over 80% of Amcom shareholders will have to vote for the deal, a very big ask.
TPG already has a 6.3% stake in iiNet and could easily lift that in a raid to a level that could frustrate that bid for iiNet (given M2Group says it will use the scheme of arrangement route to do the merger, meaning iiNet shareholders will need to approve the deal).
iiNet’s board yesterday told the ASX:
"Following its analysis the iiNet board considers the value premium of them to offer under the range of scenarios reviewed, relative to the TPG offer, is sufficient to enable the iiNet board to issue the relevant notice to TPG and commence the matching right process," iiNet said in a statement on Thursday.
"Should TPG access its rights to submit a counter proposal the iiNet board will give that proposal due consideration.
"Once the iiNet board’s ultimate recommendation has been determined, iiNet will provide full details to the market."
TPG now has the right to submit a revised proposal in the next three business days – but this could also be used to enlarge its stake in iiNet to a point where it could stop any deal from proceeding.
TPG doesn’t want to issue equity in any of these deals because that would cut the stakes of the Teoh family (36%, David Teoh is executive chair of TPG) and Washington H Soul Pattinson (with 27%).
Fairfax and other media reported yesterday that senior executives of Vocus and Amcom will try to salvage their merger deal by appealing to the remaining shareholders to hold the line. A complaint has been made to the ACCC about TPG’s share raid.
Amcom chairman Tony Grist accused TPG of using bullying tactics and said it had never engaged with his company.
“The two or three shareholders big enough to provide this block were really tricked into thinking if they didn’t sell they’d miss the train but the irony is they were the only ones able to make a difference,” he said, according to Fairfax.
Vocus chief executive James Spenceley said his job was now to help rally Amcom’s shareholders to the cause of approving the merger.
"We’ve had a ridiculously high number of votes in now with a subset of a fraction of a percent voting no," he said. "Provided we can put the effort in it still looks feasible.
"We are going to fight this to the last shareholder."
Battle ground in mid-tier telcos
But the move on that merger seems to be more a threat to iiNet and its shareholders that they might be stuck with M2Group shares and some cash, instead of $8.75 in cash on offer from TPG. The hedge funds which bought into iiNet in March after TPG launched its bid want the cash, not the paper.
M2Group will boost its shares on offer by 80% in any offer for iiNet that succeeds, so the shares will sink if the bid happens as the overhang of scrip is cleaned up. That could take months, trapping some shareholders, or forcing them to sell at a loss or smaller profit.
iiiNet shares fell 1,1% to $9.94 yesterday, M2Group shares lost 0.8% to $10.98, TPG shares fell 0.7% to $8.94, Vocus shares fell 2.7% to $5.81 and Amcom shares dropped more than 14% to $2.30.
