Report topic: Corporate Takeover Essay Example

Corporate Take over

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7. The impact of announcement of acquisition of Internode on iiNet’s share price

The share price of iiNet remained almost stagnant for a couple of months after the acquisition of Internode. The share price remained steady at $3.00 in trading. This may have been due to the uncertainty that developed in the market about the impact that acquisition would have on customer service by iiNet.

2. How the acquisition of Internode affected iiNet

The acquisition of Internode delivered more than 200 DSLAMs in telephone exchanges. In addition, iiNet has added over 260,000 active broadband services and annual revenue of $180 million. This will raise iiNet’s fixed broadband market to 15.5%, and a total of 900,000 customers, very close to its fiercest competitor and market leader, Optus. Furthermore, the very experienced Internode management team joined hands with iiNet bringing on board one of the most well-regarded telecommunications management team in Australia.

Being the most highly ranked privately owned ISP in customer satisfaction, the acquisition of Internode by iiNet would ensure the improvement of iiNet’s services and this would lead to more customers coming on board. This, coupled with the strong brand based with dominant market share in South Australia will ensure the expansion of iiNet’s market share.

IiNet and Internode operated the same infrastructure. This is of benefit since iiNet would not need to install new infrastructure so as to commence operation. IiNet’s network reach and scale would expand, which is consistent with the strategy of building scale in anticipation of the NBN. This cements iiNet’s second position as the largest Internet Service Provider.

Following the acquisition of Internode, IiNet returned a record result for the first half FY 2013 with net profit after tax up 122 per cent to $32 million. This was confirmed by the company in a statement to ASX. The cash flow generated could be reinvested to ensure the company met customer’s needs progressively. The strong cash flows have enabled it to pursue attractive strategic acquisitions, settle debts faster and lead to rise in dividends. The rise in revenue has since seen iiNet’s recent entry into the S&P/AS200 Index, which is a milestone for the company.

The company reported revenue which increased 30 per cent to $474 million. EBITDA also went up 73 per cent to $98 million. In addition, net profit after tax rose up by 122 per cent to $32 million, earning per share went up 106 per cent to $0.198 per share as the operating cash flows increased 204 per cent to $72 million. The customer driven strategy on the other hand generated low level of churn relative to the industry levels. IiNet’s business segment continued to grow strongly, which saw it post a 53 per cent increase in revenue which translates to $183 million. The business segment now generates 19 per cent of iiNet’s overall revenues. There was increased shareholder returns with interim dividend increasing by 33 per cent to $0.08 per share fully franked.

All these were due to the successful integration of Internode and TransAct. Debt levels however remain comfortable with pro forma acquisition debt of $250 million to date. While the existing bank debt facilities extended to $300 million.

Overall, the acquisition of Internode impacted positively on iiNet in the long run since it has immensely expanded iiNet’s customer base and quality of service.

References

  1. “Internode joins forces with iiNet”. Web. 8 may 2014. <http://www.internode.on.net/news/2011/12/259.php?utm_source=Internode+News&utm_medium=rss&utm_campaign=News%3A+Internode+joins+forces+with+iiNet>

  2. “IiNet to acquire Internode, Australia’s largest privately owned broadband services company.” Media release. 8 May 2014. http://www.iinet.net.au/about/mediacentre/releases/20111222-iinet-to-acquire-internode.html

  3. “Standards in issue”. Financial Reporting Council. Web. 8 May 2014. https://frc.org.uk/Our-Work/Codes-Standards/Accounting-and-Reporting-Policy/Standards-in-Issue.aspx