Perth ISP iiNet has bought New Zealand's third largest ISP Ihug for $30.1 million in cash and A$41.5 million in shares valued at $1.75 per share. iiNet shares last traded at $2.50.

As well as adding 90,000 New Zealand customers, the move will give iiNet a solid foothold of approximately 60,000 customers in Sydney, Melbourne, and Adelaide. It is expected to make iiNet the fifth largest ISP in Australia with a total of more than 300,000 customers.

Ihug's annualised revenues are $48 million, with 170,000 customers including around 70,000 in Australia.

iiNet's revenue to year ending June 2003 was $40 million when it reported a total of 132,000 active customers, of which 54 percent are in Western Australia.

Funding for the transaction will be achieved by iiNet issuing shares at $2.05 each.
Ihug is owned by Tim Wood, Nick Wood, John Wood, Bart Kindt, Malcolm Dick, and an investment company called Deep Blue Corporation.

The purchase is subject to approval from shareholders and regulatory authorities. It has been reported previously that iiNet will also seek to list on the NZX.

Details of this are unlikely before planned completion of the transaction on 21 October. A meeting of iiNet shareholders has been called for 17 October to approve the purchase. Ihug was founded in 1994, iiNet in 1993.