Internet service provider iiNet Ltd yesterday confirmed the $40 million acquisition of Melbourne-based internet and fixed telephone company, Netscape.
iiNet had earlier asked for trading in its shares to be suspended for up to two days to allow it to reveal a major takeover-related announcement.
Several hours after that request, the company revealed the deal in a statement to the ASX.
The shares were relisted and jumped more than 6.9% to $2.60, a rise of 17c.
Earlier this month, iiNet said it was discussing a takeover of rival Netspace but a final decision on any deal had yet to be made.
Media reports estimated the acquisition to be between $60 million and $75 million.
iiNet has said at the time that figure was too high. It was, as yesterday’s price tag revealed.
Netspace is a Melbourne-based internet and fixed telephone services provider with an estimated 80,000 business and residential customers.
In the statement, iiNet Chief Executive Officer, Michael Malone, said "the acquisition would consolidate the company’s position as the leading challenger brand in the Australian telecommunications market".
The $40 million cost will be 100% debt funded, iiNet said.
According to the company’s statement yesterday, the reasons for the purchase were: "consistent with iiNet’s strategy to grow through consolidation and lifts iiNet’s market share to 12.4%, and towards its 15% target, with an increase of over 70,000 broadband customers to more than 520,000 broadband customers, and an increase of over 120,000 active services to around 920,000 total active services.
"Netspace has a strong business with high historic subscriber growth rates and low churn, it Strengthens iiNet’s market position in the key markets of Victoria, New South Wales, and Tasmania; iiNet and Netspace have complementary geographical footprints with significant potential to migrate Netspace customers on-net; it has significant potential to generate substantial synergies given the complementary nature of both businesses and the purchase will be EPS accretive (pre-synergies) from the first full year for iiNet shareholders," iiNet said.
"Netspace is a natural fit for iiNet given the strong alignment of the companies’ products, networks and cultures. It is a great business, having grown strongly in the residential market, and has a loyal customer base given its customer service focus," Mr Malone said in the statement.
"iiNet expects Netspace to generate over $70 million of revenue and $8 million of EBITDA in FY11 before synergies," he added.
