A storm in a frustrated shareholders’ tea cup, or a real complaint? Whatever it is, the campaign to try and get TPG Telecom (TPM) to pay more for iiNet (IIN) seems to be a rather circular affair.
Yesterday iiNet founder and former chief executive Michael Malone, who had first off supported the TPG offer, revealed he had changed his mind and was now calling on fellow shareholders to reject TPG’s $1.4 billion takeover bid.
According to comments reported by Fairfax Media, Mr Malone also made a scathing attack against iiNet’s board of directors.
Mr Malone owns around 4% of the company, making him one of its biggest owners, and the recipient of more than $56 million if TPG maintains its offer at $8.60 a share, plus the interim dividend of 10.5 cents a share.
“My family and I do not believe this deal as it is structured is in the best interests of shareholders, staff or customers,” he was quoted as saying. "Indeed, it is appallingly silent on the impact on staff and customers.
"It’s not the time to sell, it’s a time for change."
He said a lack of communication from iiNet’s directors and further review of the offer has forced him to change his view.
Mr Malone directed most of his blame against iiNet’s board of directors, rather than its senior management team or TPG, telling them simply to "leave".
"I ask that if this deal is defeated, then the current board stand aside," he said. "They have run out of ideas on how to grow this great company. Leave."
"Management is constrained by a board that is consumed by compliance instead of growth," he said. "I ask shareholders to put forward entrepreneurs for the board who reflect the culture."
IIN vs TPM 1Y – iiNet founder slams TPG deal
iiNet’s board said it was “very disappointed" with Mr Malone’s public comments.
iiNet pointed out that “Mr Malone has not been a director of iiNet for nearly a year, and has not participated in the management of the Company for a longer period,”
"He has expressed support for the transaction both publicly, commenting that it was a "sensible deal" and "a cash offer and a good price", and in discussions with the Company since the offer was announced and has now changed his position with no apparent basis.
"Were Mr Malone a director of iiNet today with the information and knowledge available to the board, his fiduciary duty to shareholders would have compelled him to join with the other directors and present this sensible, well priced cashed offer to shareholders."
Mr Malone’s comments come after murmurings among some iiNet shareholders that the TPG offer is too low. Some are trying to get an auction up by suggesting smaller rival M2 might be interested, or even Optus Singtel (the latter maybe wishful thinking).
It would need FIRB approval, and being a larger player than TPG, would find it tougher to get ACCC approval. TPG has to get ACCC approval, but it buying iiNet would create a major player in fixed line broadband internet and increased competition to Telstra and Optus.
We will possibly learn more about TPG’s attitude to this opposition to its iiNet play when TPG reveals its interim results later today.
TPG CEO, David Teoh has never taken a backward step in what is a tough minded industry. He can easily build its current 7% stake to just over 10% and frustrate any rival bidder, or it could abandon iiNet and turn to the merging Amcom/Vocus, via a 6.25% stake.
Teoh and his wife control around 36% of TPG, but the company has a big backer in the wealthy Washington Soul Patts investment group based in Sydney with around 27%.
iiNet shares eased 1.1% to $8.85, while TPG shares rose 0.3% to $8.83.
