WiMax-friendly ISP Unwired has sent a letter to shareholders advising they accept broadcaster Seven's up to AU$127 million takeover bid for the company.
Seven is offering Unwired shareholders 45c per share, or 50c per share should it gain over 90 percent of Unwired shares by 8 November.
The company's directors, excluding Chris North who has excused himself from consideration of the offer as he provides consulting services to Seven, are now recommending that shareholders take up the broadcaster's offer "in the absence of a superior proposal" and have stated they intend to sell their own shares to Seven.
In a letter to shareholders, the directors say they have backed the deal for several reasons, including the premium the offer represents on Unwired's share price, the lack of a competing offer and uncertainty around competition in Australian broadband.
The directors have also talked up the cost impact a nationwide WiMax rollout could have on the business and the threat it may pose to the company's share price if Unwired has to raise more investment to support it.
"If a decision is made to roll out a mobile WiMax network the estimated investment required could be significant," the letter said, quoting Seven's figure of AU$200 million. Currently, Unwired would need to consider further fundraising to expand the network, according to the directors, as it has only "raised funds for the incremental expansion".
Should Seven achieve a majority ownership of Unwired, but not meet its 90 percent target, it will charge the ISP with raising the necessary finances for the nationwide WiMax rollout, which could dilute the share price, the letter to shareholders said.
The directors have also raised questions over risks to the company's business model, citing the competitive nature of Australian broadband, the threat from mobile HSPA technologies and "relatively untested" nature of WiMax in urban environments.
The directors are now recommending that 100 percent of Unwired shares be sold to Seven before the 8 November deadline.
Not all shareholders have welcomed the bid. A group of investors on the Whirlpool broadband forums are hoping to derail the bid, claiming it undervalues the potential that WiMax spectrum offers. The band of shareholders is hoping to amass over 10 percent of Unwired shares in an effort to prevent a total takeover of the ISP by Seven.
