iiNet has announced it will buy the Adelaide based company for $60 million. It is the same amount Telstra had offered before its bid was knocked back by the Australian Competition and Consumer Commission (ACCC).
Telstra announced in October 2012 it was buying Adam, but the ACCC complained about its potential impact on the rest of Australia's budget ISPs and scotched the deal on 23 July. Rival service providers – iiNet included – had submitted that Telstra would use Adam Internet to corner the budget ISP market, giving it an unfair advantage in both the high end and budget markets.
It is now apparent that when iiNet made its complaint to the ACC it launched its own bid for Adam – in its statement announcing the deal, iiNet said that the ACCC has already cleared the transaction.
Adam Internet has approximately 70,000 broadband subscribers, located primarily in South Australia and the Northern Territory. That means iiNet is paying nearly $1000 per customer. The acquisition will increase iiNet’s customer base to over 900,000 broadband subscribers, and add a range of key South Australian business and government clients consuming data-centre, hosting and cloud services. Adam Internet has a new data centre in Adelaide and additional DSLAM and fibre network infrastructure.
iiNet based the acquisition on expected revenues of $55 million and a profit (EBITDA) of $11.5 million. “There will be many synergies form 2015 onwards,” said Greg Hicks, Executive Chairman and Founder of Adam Internet.
“There will be cost synergies available from bandwidth and backhaul as well as the integration of systems and suppliers. There is also the opportunity to increase the bundled product offering to Adam Internet customers from iiNet’s existing product suite.
“The transaction represents a great outcome for Adam Internet customers and staff,” said Hicks. “It aligns them with iiNet, Australia’s leading ISP in customer service. Adam Internet has long provided customers with innovative products, high quality service and value for money, and this will be further strengthened under iiNet’s ownership.
iiNet’s Chief Executive Officer, Michael Malone, said the acquisition reinforces the company’s position as Australia's leading challenger in the telecommunications market. “Like iiNet, Adam Internet has a loyal customer base and strong reputation in its core markets. This acquisition further builds on our strategy to grow scale in the national residential and business broadband segments.”
iiNet is already Australia’s second largest DSL ISP (after Telstra). It was founded by Michael Malone in Perth in 1993 and has acquired many smaller rivals over the years, the most significant being Froggy, New Zealand’s ihug (subsequently sold to Vodafone NZ), OzEmail’s residential business, Westnet, and more recently TransACT and Internode.
After the ACCC knocked back Telstra’s bid. Adam’s Greg Hicks said it was “business as usual” as he was secretly finalising the iiNet deal. The speculation now is whether Telstra will pursue another budget ISP, or perhaps launch its own spin-off budget brand.