If you’re one of the 1.6 million Australians that has used online price comparison website iSelect (ASX: ISU) to compare utility prices, phone plans or insurance quotes – you’re about to have your personal details sold, with the Company having received an offer from their largest competitor to acquire all shares at an 87% premium.
What makes the offer, at $0.30 per share, most remarkable is that it comes from Innovation Holdings Australia (IHA) which attempted a similar takeover in August 2020 before it was called off citing a changed environment brought upon by the COVID-19 pandemic.
On that occasion, the offer from IHA was at $0.40 per share.
When the takeover was called off, iSelect took it upon themselves to buy ISU shares on-market when increasing their share holding from 29% to 35%. But having done so without consulting the ACCC, the consumer protection regulator launched its own inquiry given that IHA owns rival price comparison site comparethemarket.com.au.
At the time, ACCC Commissioner Stephen Ridgeway said: “We are considering whether the completed and proposed acquisitions are likely to substantially lessen competition. iSelect is a competitor to Innovation Holdings in offering comparison services for a range of financial and energy products to consumers and minority stakes held between competitors can give rise to competition concerns.”
Since then, the market has changed notably with a major business transformation that seeks to captilise of legislative changes around Consumer Data Rights (CDR) with a raft of consumer-friendly regulation introduced over the past three years.
The model is a major transformation from the price comparison business previously operated where iSelect revenue was primarily generated from affiliate marketing where they would receive fees for any customer that signs up via the website, to a service provider. The business model came unstuck when the ACCC issued iSelect a fine for $8.5 million in October 2020 for misleading its customers between 2016 to 2018. Customers affected were led to believe they were getting the best price comparisons, when in fact they were only being recommended ones that iSelect would gain affiliate marketing commissions on.
In the aftermath of those events, and the rise of comparethemarket.com.au, ISU shares have continued to fall from $2.00 in 2018 to have last traded at $0.16.
For the six months ended 31 December 2021, iSelect reported $44.6m in revenue which was a 14% decline on the previous year, but cost cutting measures flowed down to the bottom line where net profit after tax of $474k was a big improvement on the previous year’s $3.6m loss.
Having waited two years before restarting discussion, IHA’s offer comes at a 25% discount to their previous offer but at $0.30 per share, the iSelect board still unanimously recommends that shareholders accept the offer.
“The Board has carefully considered the strategic options available to iSelect in light of the certainty for shareholders that this all-cash offer provides,” said iSelect Chairman, Brodie Arnhold.
“The Directors of iSelect unanimously recommend that shareholders vote in favour of the Scheme, subject to there being no superior proposal and the independent expert concluding that the Scheme is in the best interests of iSelect shareholders.
“The Scheme provides an opportunity for shareholders to realise a significant premium to market value for their shares and provides the certainty of an all-cash offer.”
At $0.30 per share, the offer values iSelect at $72 million with IHA already owning 26% of iSelect. Major shareholders Thorney Investment Group (14.34%) and Microequities (9.50%) have already indicated they will vote in favour of the takeover which makes it a mere formality to gain shareholder approval at that price.
The biggest hurdle will come via the ACCC which will need to sign off on the deal where it is expected they will have reservations again. Should all be signed off by regulators, iSelect expects the takeover will be finalised by March 2023.
Can someone check if the domain controlthemarket.com.au is available?
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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