Veteran NZ ISP heads for Aussie ownership

One of New Zealand’s oldest ISPs is heading into the hands of the Australians soon.

Ihug Ltd. is in discussions with Perth-based iiNet Ltd. that could see the local ISP swallowed up by its larger Aussie neighbour, says Ihug managing director Martin Wylie.

Wylie says the New Zealand end of the negotiation should be signed off by the end of the month.

“Then it has to go through their approval process in Australia as a listed company so it would probably be the end of September before we’re all done.”

Wylie wouldn’t comment on the price paid for Ihug as iiNet is a publicly listed company, however according to the Western Australian paper, the deal is worth around $A25 million (US$16.5 million) in shares and cash.

Wylie says Ihug has been looking for investment for some time and has talked with iiNet in the past, however for various reasons the talks had amounted to nothing.

“Basically this will mean we get access to their listing on the stock exchange over there and that will help us with capital raising that we simply couldn’t get as a private company in New Zealand.”

Current shareholders in Ihug, notably co-founders Tim and Nick Wood along with CallPlus managing director Malcolm Dick, will retain their share levels, transferring them to iiNet stock instead.

This isn’t the first merger deal Ihug has announced – in 1999 Ihug was to merge with Sky TV in a deal estimated to be worth NZ$35 million (US$20.5 million) although that fell through following the release of salary demands from the Wood brothers that stretched to NZ$500,000 each with 10 weeks leave.

A further merger deal with Force corporation collapsed in 2000 and Ihug’s purchase of video retail chain Video Ezy was abandoned with Ihug selling its 51 per cent stake in the company back to the original owners just over a year later.

The Perth-based iiNet is estimated to be the country’s second largest DSL provider and generated revenues of $A40 million last year.