M2 CEO: Acquiring iiNet would 'bring two great businesses together'

The potential acquisition of iiNet would be an "opportunity to bring two great businesses together," the CEO of M2, Geoff Horth, said this morning.

M2 earlier today confirmed it had approached iiNet's board with the view to acquiring the ISP. The proposal came as TPG was already moving to acquire iiNet.

The proposed acquisition is a "significant opportunity" for M2, Horth said. The announcement comes just weeks after M2 revealed it would acquire New Zealand ISP Call Plus for $245 million.

"Very shortly after the announcement of the Call Plus acquisition, we made our initial approach to the iiNet board, and that the offer has been with them for four or five days now," Horth said.

Horth couldn't confirm whether M2 has had previous discussions with iiNet about acquiring the ISP. However M2 has "had an interest in this business for quite some time," the CEO said.

If the acquisition goes ahead, the iiNet brand would be retained. TPG has also indicated it would retain the iiNet brand.

Dedicated sales and services organisations for the iiNet brand would be retained, M2's CEO said.

"We don't need to disrupt any of the current operations of the business that are customer-facing," Horth said.

"I think there should be great comfort that the integration risk associated with this business is quite low."

Part of the proposal is for two of iiNet's non-executive directors to join M2's board, Horth said.

"The intent there is to get some continuity and a voice for iinet team members and suppliers and shareholders," as well as oversight of the merger strategy and the extraction of synergies in the enlarged M2 Group, the CEO said.

"Both the M2 and iiNet management teams have demonstrated over a long period of time that they're capable of integrating acquired assets and extracting synergies."

Horth cited M2's acquisitions of Commander, Primus and Dodo as examples. Across the ranks of senior leadership within M2, 70 per cent joined as the consequence of an acquisition, the CEO said.

The M2 and iiNet business models are "in some respects are very similar".

"We both play that sort of value-add service provider role — we're not deep infrastructure owners... We go to market in different ways but frankly I think we have very similar philosophies," Horth said.

"We'd be working very hard to preserve the value of the iiNet brand and the passion of its people and its customer advocacy as part of this transaction.

"It's going to be core to us getting the right outcomes and I think from my perspective the scoreboard speaks for itself — we've obviously made a reasonable fist of acquiring and integrating assets."

Under M2's proposal, iiNet shareholders would receive .803 M2 shares per iiNet share ($9.25 per share at M2's closing price on 24 April). They would also receive $0.75 cash per iiNet share. In addition, M2 estimated synergies of $1.37 would accrue to iiNet shareholders.

Under TPG's proposal, iiNet shareholders would receive $8.60 cash per share.

Copyright © 2015 IDG Communications, Inc.

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