TPG is set to surpass Optus as Australia's second biggest internet provider with a $1.4 billion takeover of rival iiNet.
The deal will inflate TPG's customer base to 1.7 million, ahead of the 988,000 currently with Optus, and putting it behind only Telstra, which has 3 million customers.
TPG plans to run the two businesses separately, using iiNet to target premium customers who are willing to pay more for greater service and connections, while keeping its core brand as a low cost alternative.
"Definitely we want to keep the brand, we respect and value the iiNet brand," TPG's consumer general manager Craig Levy said.
The takeover has the backing of iiNet's board of directors but still needs approval from shareholders and the consumer watchdog.
The ACCC has already announced it intends to carry out a public review of the deal, but TPG is confident its plans to keep the two businesses separate will keep the regulator at bay.
TPG has offered to pay $8.60 for each iiNet share, a 33 per cent premium above iiNet's five day average share price in the lead up to the takeover announcement.
Shares in iiNet jumped $1.69, or 24.8 per cent, to $8.50 on Friday, while TPG shares climbed $1.37, or 17.7 per cent, to $9.11.
iiNet chairman Michael Smith has urged shareholders to accept the deal.
"The board views this as a significant reward for shareholders who have shown their faith in iiNet," he said.
TPG chief executive David Teoh said the two companies would fit well together.
"iiNet and TPG are highly complementary businesses in terms of geographic presence, market segments and corporate customer base," he said.
"The combined businesses will provide broadband services to over 1.7 million subscribers and will be well positioned to deliver scale benefits in an NBN environment."
IG market analyst Evan Lucas said the deal has been expected for years.
"It's the worst kept secret ... it was always going to happen," he said.
The $1.4 billion price tag is fair for both companies, Mr Lucas said, especially in light of iiNet's disappointing half year financial result.
"It's a good price ... it's not expensive but it's certainly not cheap."
iiNet shares lost 11 per cent in one day in February after it reported a one per cent rise in profit to $29.5 million.
If approved by iiNet shareholders and the ACCC, the takeover is set to be completed in July.
