Shares in iiNet have soared after the internet service provider confirmed its intention to buy Canberra-based TransACT for $60 million.
The company said on Monday it had entered into a binding agreement to purchase TransACT, and described the acquisition as “consistent with building scale through consolidation”.
News of the deal, which had been widely mooted in recent times, lifted iiNet shares when the company emerged from a trading halt on Monday.
The stock climbed 19 cents, or 8.05 per cent, to finish at a $2.55, the highest close since October 31.
iiNet chief executive Michael Malone said the deal would cement the company’s position as “the new number two provider” of DSL broadband.
TransACT had about 40,000 customers throughout the ACT, Queanbeyan and regional Victoria, iiNet said, across the residential, business and government sectors.
“iiNet’s acquisition of TransACT represents an attractive strategic opportunity to build scale in the ACT market quickly and efficiently,” Mr Malone said in a statement.
“In addition, TransACT will also provide iiNet with the opportunity to deliver super-fast broadband services in the region, similar to our recently launched NBN plans.”
iiNet said TransACT had “total recurring annual revenue” of about $80 million and earnings before interest, tax, depreciation and amortisation of $17 million.
The purchase would be funded through cash and existing debt facilities and was earnings per share accretive (pre-synergies) for iinet shareholders, the company said.
The deal was expected to be completed by November 30, 2011, subject to a small number of procedural conditions.
While the existing owners would exit the business, iiNet said in a slide presentation the senior management team would stay.
TransACT chief executive Ivan Slavich said the deal presented TransAct with some exciting growth opportunities and would be well received by the company’s customers.
