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No halting the iiNet acquisition train

Trading in iiNet Limited (Public, ASX:IIN) was halted this morning amid speculation that the Perth based internet service provider will acquire Canberra ISP TransACT. Trading is halted until the earlier of Friday 18th November or when the announcement is released to the market.

Street Talk reported in the AFR that iiNet was the preferred bidder for TransACT. The companies are rumoured to be  in the final stages of working out an agreement. With only $5.5 million of cash on iiNet’s books as of June 30, the company will need to raise debt or equity to finance the deal.

Acquire or be acquired
As the chart below highlights iiNet has been walking the acquisition trail for many years.

Source: S&P Capital IQ

iiNet acquired Netspace and the the consumer division of APPT in 2010. In 2008 it acquired Up N’Away and Westnet, while back in 2005 it acquired OzEmail to becomes Australia’s
third largest ISP. iiNet is currently the second largest ISP in Australia.

This potential acquisition comes amid market speculation that rival TPG Telecom Limited (ASX:TPM) was considering buying iiNet. It was only last month that TPG’s announced it had accumulated 7.7 million share or 5.14% of iiNet. The belief in the sector is only the large will survive.

Update
The Australian has now reported the deal is in the final stages and worth up to $80 million.

The proposed deal, which is believed to be worth between $60m to $80m, will cement iiNet as the clear third force in Australian telecommunications while simultaneously providing the telco with a launch pad into the lucrative government and corporate services sector…Sources close to the sale told The Australian iiNet will use the acquisition to diversify its business into the government and corporate space. TransACT counts about 5000 corporate customers on its network.

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