iiNet Limited (ASX: IIN) has reportedly scheduled meetings with major shareholders on Monday following reports that many investors were unhappy with the takeover offer received from TPG Telecom Ltd (ASX: TPM).
While iiNet's board has unanimously backed the $1.4 billion offer (representing $8.60 per iiNet share, and a premium of 33% based on the five-day average trading price leading up to the announcement), many investors believe the price was too low considering the synergies that would be recognised by TPG. It was argued that the $1 billion rise in TPG Telecom's market capitalisation following the announcement was evidence of this.
The Fairfax press reported that major shareholders, including BT Investment Management, are unhappy about the lack of communication received from the company. While iiNet's management acknowledged it had been slow in contacting investors, it will now meet with many over the course of the week to discuss the arrangement.
Although shares of both companies skyrocketed following the deal's proposal, it is still no certainty to go through. Firstly, given that the deal is being done by a scheme of arrangement, a minimum of 75% of votes must be in approval.
It's also possible that a rival – most likely M2 Group Ltd (ASX: MTU) or Optus (owned by Singapore Telecommunications Ltd (CHESS) (ASX: SGT)) – will enter a higher bid. While TPG Telecom can increase its stake in the business to block such an offer from a rival, a rival bid could at least force TPG Telecom to raise its own offer price.
As it stands, iiNet's shares are trading at $8.95, or 4.1% above TPG's original offer price. As such, it is clear that investors are expecting a better deal will be struck some point between now and July.
