[AusNOG] TPG vs the World

Thu Apr 30 22:15:40 EST 2015

I have to say it¹s been a remarkable few days in the industry and there is
much more to happen ahead.  I agree that it isn¹t ³nice² to acquire blocking
stakes in companies to thwart your competitors from winning the prize.  But
it isn¹t necessarily (and is actually rarely) anti-competitive under the law
unless you were the monopoly or at least had significant market influence.
In this case you could expect it would be pretty reasonable to argue with
the ACCC that NOT letting Vocus acquiring Amcom is actually better for
competition as there are more players in the market, more east coast
providers etc.. (Granted I can also see the counter to that argument too,
being that a stronger Amcom/Vocus entity would create a new alternative
national provider  which I think is more realistic and beneficial for
competition).  Agree it is not ³nice² and I sincerely feel for both Amcom
and Vocus. I particularly feel for the Amcom shareholders who have probably
lost a tremendous opportunity to exit/merge with Vocus.  Share price is down
15% today and Vocus haven¹t been affected much.  Market is a good indicator
of value shifting here.

But lets keep a bit of perspectiveŠ

Just last month Vocus acquired 15% of Macquarie Telecom as a ³strategic
stake² more than likely as a blocking stake/foot on an option.  Smart move
again from Vocus and appreciate there was no deal in play, but rumours
suggested it was being sized up by multiple parties.
http://www.arnnet.com.au/article/572879/vocus-buys-15-million-stake-macquari
e-telecom/

Vocus¹ 15% stops any friendly/compulsory takeover  of Macquarie (need 90%
minimum acceptance).  100% minus Vocus¹ 15% is 85% maximum acceptance.  No
can do.

But more interestingly in the case of Macquarie Telecom where the founders
and major shareholders are on the Board (Directors) and own approx 60% of
the shares on issue, under the alternative takeover process called Scheme of
Arrangement (which is what Vocus proposed for Amcom and TPG for iiNet) you
are required to get 75% of the eligible votes on the day of voting  and
importantly the Directors of the Company cannot vote their shares.  With
Macquarie Telecom that would mean the Tudehope¹s vote can¹t be counted and
therefore there is less than 40% of the shares available to be voted on.
With Vocus holding 15% there can be no takeover via scheme without Vocus¹
approval.  If Vocus vote against any future scheme then the maximum vote
possible is 70% which is less than the 75% threshold.  Therefore  Vocus
stake in Macquarie Telecom acquired last month has the exact same effect as
the blocking stake now held by TPG in Amcom (actually Vocus and Amcom could
still theoretically go ahead).  It will be difficult for Vocus to seriously
argue the merits of this without drawing attention to their actions a month
earlier.   The value of hindsight I suppose.

The next thing to watch is what happens in the week with M2 and iiNet.
Under the Scheme Document TPG will have 4 business days (I think) to counter
M2¹s offer.  This will all keep playing out over the next week.  I think
there maybe merit in Vocus/Amcom arguing with the ACCC that if TPG do get
their hands on iiNet, then as part of their approval they should required
TPG to dispose of their (or related parties) interests in Amcom.  TPG will
be the second largest player in terms of broadband, acquired two (2)
domestic/metro fibre networks and their stake in Amcom at that point could
be argued to be bad enough for the ACCC to make it a term of conditional
approval (i.e. approved subject to disposal).  Time will tell and
unfortunately the iiNet/M2/TPG battle probably won¹t be decided until after
the upcoming Vocus/Amcom vote (unless delayed).  If M2 get iiNet, then I
think the Amcom stake held by TPG will stay.

An interesting wrinkle/concept is that iiNet/M2 (and to some extent
Vocus/Amcom) have as a possible option is that even if TPG/DT did block a
deal between in iiNet and M2, there is nothing stopping iiNet breaking the
offer (except for the lazy $15m in break fees) reversing the tables and
having a friendly crack at M2 at exactly the same transaction with the same
value, just that iiNet is the "acquirer" and M2 is the ³target".  This would
effectively kill of TPG¹s blocking stake because shareholder approval by the
acquirer is only 50% as long as no shareholder in the new merged entity
would control more than 20% (which I¹m pretty sure is the case in both
iiNet/M2 and Vocus/Amcom) then the deal would proceed.  Again the same
reverse takeover could apply to Vocus/Amcom.

Anyway, there¹s some smart operators with some smart advisors and and it¹s
not even half time me thinks.

Cheers

[b]

From:  Shane Short <shane at short.id.au>
Date:  Thursday, 30 April 2015 3:53 pm
To:  Damian Guppy <the.damo at gmail.com>
Cc:  "ausnog at lists.ausnog.net" <ausnog at lists.ausnog.net>
Subject:  Re: [AusNOG] TPG vs the World

I think investing in a competitor to stop them being bought by another
competitor, so you then don't have to compete with them is by definition
anti-competitive (well it should be by the amount of times I said compet*).
Some analysts have mentioned this might be a shot across the bow to iiNet
implying "take our deal over M2's, or we'll do this to you and block the M2
deal too".

Regardless of the end game, it's clear Teoh's got his shit in a twist about
something and he's throwing his money around to get his way. Hopefully the
anti-telstra commission step in and do something useful.

Regarding consolidation in the industry, it's bound to happen, if nothing
else the POI/CVC charges are going to make it extremely difficult for
national carriers to offer services everywhere-- but it does open another
potential avenue; where you have smaller players focusing on their own
little back yards, buying connections to specific POIs inside their market;
almost like the dialup days before MegaPOP.

-Shane

Damian Guppy wrote:
>  
> Lets just take TPG, M2, iiNet, Amcom, and Vocus, and merge them all into one
> giant company. That way we can stop all this fighting. We can take the names
> of the top two companys (TPG and M2) and combine their names to be T2.
> 
> Wait....
> 
> But seriously, it is clear TPG is just blocking the Vocus+Amcom stuff just
> because they don't want that competition. I wouldn't call it "toys being
> thrown out of the sandbox" but just very very aggressive corporate dealings by
> TPG. At some point they are bound to cross the line, and this could be that
> line. Consolidation in the telco sector is inevitable thanks to the NBN.
> 
> --Damian
>  
> 
> On Thu, Apr 30, 2015 at 10:25 AM, Brad Peczka <brad at bradpeczka.com> wrote:
>> TPGs campaign to own every customer and strand of fibre in Australia
>> continues, with an announcement from Amcom this morning
>> (http://www.asx.com.au/asxpdf/20150430/pdf/42y7jb0tv5530k.pdf) stating that
>> they intend to refer TPGs actions and purchase of a blocking stake to the
>> ACCC.
>> 
>> There was a related article on ITNews
>> (http://www.itnews.com.au/News/403386,tpg-boosts-amcom-stake-to-block-vocus-m
>> erger.aspx), in which James from Vocus makes some choice quotes - my personal
>> favourite being "And that's the shame of it, one anti-competitive telco is
>> affecting the value and the future of 9000 mums and dads. It's disgusting
>> really."
>> 
>>> >From the outside looking in, the whole TPG/Vocus/Amcom thing smacks of toys
>>> being thrown out of the sandbox because TPG can't have it all their way. The
>>> act of buying shares to block a merger without making a competing offer
>>> screams anti-competitive behaviour, though there's no undertaking that TPG
>>> won't make a bid for Amcom at a later date (and lower price?) if the Vocus
>>> deal gets scuttled?
>> 
>> Looks like interesting times ahead for all involved in the iiNet and Amcom
>> deals...
>> 
>> Regards,
>> -Brad.
>> _______________________________________________
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>> AusNOG at lists.ausnog.net
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> 
>  
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