iiNet in takeover talks with Netspace

Perth-based ISP iiNet has confirmed it is currently in discussions with competitor Netspace regarding a possible acquisition, following a trading halt yesterday.

The move comes as iiNet is attempting to spread across the country, following initial success in Western Australia and a massive marketing push along the east coast.

In a statement to the Australian Securities Exchange, company secretary and chief financial officer David Buckingham said it is in talks with the company, but the reported price of up to $75 million is well above the figure being discussed.

“We advise that we have been in discussions with several parties including Netspace… however, the discussions are at an early stage and remain incomplete, and the iiNet board has taken no decision regarding the potential acquisition.”

“We have publically stated that we are interested in sensible acquisitions in the future, as a result we are continually engaged in assessing strategic options and regularly hold discussions with industry participants – often associated with a potential takeover.”

Netspace co-owner Stuart Marburg confirmed to News.com.au that the company had “not actively sought offers for the business but it makes good business sense for Netspace to consider all relevant opportunities put forward to us”.

Marburg founded the business with Richard Preen in the 1990s, focusing on dial-up internet access. Both are still actively involved in the business, headquartered in the Melbourne suburb of Camberwell.

The acquisition would make good sense for iiNet, which has been steadily growing over the past few years as it continues to branch out from its Perth base. It is currently the third largest ISP in the country behind Telstra and Optus, with revenue of $228 million, according to the company’s first-half results.

But this growth hasn’t occurred due to sales alone. It has relied on acquisitions along the way, the biggest of which arguably being the $81 million takeover of Westnet in 2008.

The Netspace acquisition would add about 80,000 customers in the Victorian and Tasmanian areas. iiNet would bring several new products to the Netspace customer base, including Naked DSL and VoIP plans.

Netspace was one of the original ISPs named by the Government that would take part in its live trials for the internet filter. However, a subsequent survey released by the company indicated the majority of its customers were opposed to such a plan.

iiNet managing director Michael Malone has also been outspoken in his opposition against the filtering plan.

Buckingham said in a statement the company would update the market with results of any discussions.

“If any discussion with Netspace, or any other industry participant, leads to a material development, the company will inform shareholders in keeping with its continuous disclosure obligations.”