Traders bet on sweetener for Australian Internet deal

Traders are betting it will take a higher price to seal Australia's biggest telecommunications takeover in almost four years.

IiNet Ltd's board last month agreed to an A$8.60-a-share takeover by TPG Telecom Ltd, valuing the Internet provider at A$1.4 billion ($1.1 billion). Yet IiNet's largest investor and its co-founder, Michael Malone, both say the offer is inadequate. The deal needs shareholder approval at a meeting scheduled for June.

The tie-up would turn TPG into Australia's second-largest broadband provider, and local competitors Singapore Telecommunications Ltd or M2 Group Ltd may emerge as counterbidders, according to UBS Group AG. IiNet on Wednesday closed 3.3 percent above TPG's cash offer, a signal traders expect the company will ultimately win a higher price - either from TPG or another bidder.