iiNet Limited (IIN) is pleased to announce that it has entered into a binding agreement to acquire Netspace.
iiNet Chief Executive Officer, Michael Malone, said the acquisition would consolidate the company’s position as the leading challenger brand in the Australian telecommunications market. “This acquisition will bring iiNet closer to our target of fifteen percent market share in the fixed line broadband market prior to the commencement of the National Broadband Network,” Mr Malone said. “Netspace is a natural fit for iiNet given the strong alignment of the companies’ products, networks and cultures. It is a great business, having grown strongly in the residential market, and has a loyal customer base given its customer service focus.
Acquisition of Netspace is consistent with iiNet’s strategy to grow through consolidation . It lifts iiNet’s market share to 12.4%, and towards its 15% target, with an increase of over 70,000 broadband customers to more than 520,000 broadband customers, and an increase of over 120,000 active services to around 920,000 total active services . Netspace has a strong business with high historic subscriber growth rates and low churn. It also strengthens iiNet’s market position in the key markets of Victoria, New South Wales, and Tasmania. This acquisition has significant potential to generate substantial synergies given the complementary nature of both businesses. iiNet expects to realise significant potential synergies through the migration of Netspace customers to iiNet’s network and through lower bandwidth costs. Potential synergies are expected to be $2 million in the first year, and $5 million in the second year of iiNet’s ownership.
Under the sale and purchase agreement, iiNet will pay $40 million for Netspace. The acquisition consideration will be 100% debt funded. Completion is subject to a number of procedural conditions and is expected to be achieved by 30 April 2010.