The TPG Telecom Ltd (ASX: TPG) share price received a boost today after the Australian Competition and Consumer Commission (ACCC) announced that it will not oppose a proposed buyout offer of Amaysim from Optus. This surprising announcement has now opened the door for TPG to make a counter offer for Amaysim’s prized business.
The TPG share price jumped by 4.81% today to $8.07 following the announcement.
What’s the background behind this
Optus had offered $250 million to Amaysim’s shareholders to purchase its business. The proposal had been submitted to the ACCC for review, before being given the green light today by the competition watchdog.
Today’s decision was seen to be significant by market analysts, especially since the ACCC had earlier tried to block a merger attempt between TPG and Vodafone – a case the ACCC lost in the courts.
The news means that the door is now wide open for a takeover battle over Amaysim. Analysts are expecting TPG to make a counter offer with respect to Optus’ $250 million proposal – which many believe is too low.
The market also believes that the proposal from Optus is unorthodox – as it wants to only buy the 1.19 million Amaysim customers and not take over the entire business. This means that Amaysim management must use about $100 million of the proceeds to wind up the company, leaving shareholders with only $150 million.
Amaysim shareholders are due to vote on the deal in January 2021.
Why the battle for Amaysim
Amaysim is by far Australia’s leading low-cost mobile network reseller, known as the mobile virtual network operators (MVNO). It has 1.19 million subscribers or about 35% of Australia’s MVNO market. The company’s 10-year wholesale contract is due to expire in June 2022, which prompted Optus to make the bid.
Analysts at Goldman Sachs have said that TPG would get a 30% earnings per share uplift even if it bought Amaysim for double the price Optus is offering. The broker says that Amaysim’s 1.9 million customers would give TPG’s newly launched low-cost mobile network Felix a boost against its competitors.
TPG share price in 2020
The TPG share price has lost almost 10% since it listed on the ASX in June this year. On the first day of trading, the TPG share price closed at $8.90. It dropped to $7 at the beginning of November, before regaining ground to today’s price of $8.07. The company commands a market price of $14.3 billion.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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