Netspace-iiNet deal may never happen: Malone

Negotiations have been ongoing for the last 12 years, iiNet's CEO says

iiNet CEO Michael Malone has thrown cold water on speculation that his company’s acquisition of Netspace is a done deal, saying that an agreement with the ISP may not be made this year, if ever.

“We are a long way from a deal – we have talked with these guys on and off for 12 years, so I wouldn’t be assuming anything right now,” he told Computerworld Australia

Malone said that the current hold-up in negotiations came down to disagreement over iiNet’s valuation of Netspace, which lies between $60 million and $75 million.

“We use an industry specific metric called Discounted Cash-Flow -- in other words, it’s down to valuation,” he said. “We look at our projections of where we can take the business based on bringing Netspace’s customers on to our network. Based on that we can work out what the company is worth to us.

“If the [Netspace] guys want more than that, no deal. That’s why we’ve never reached a deal before: they think it’s worth more than we do.”

Aside from gaining additional customers, a deal with Netspace, should it occur, would provide iiNet with additional exchanges in Victoria and Tasmania.

“Normally when we acquire a company, like Westnet, the synergies – the place you save money – is in moving the target’s customers to our network,” he said.

“In the Netspace case, they have about ten exchanges more than we do in Tasmania and some in Melbourne we don’t have. They have already done the hard yards of building out on their own capital and at their own risk to do that. Otherwise the businesses are quite similar.”

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