Vodafone buys Hutchinson-Essar for $19.3 bn

UK-based telecom giant Vodafone has made the winning bid for the 67% stake in Hutchison Essar (HEL) at an EV of $19.3 bn (Rs. 86,000 crores). This is the largest acquisition in India. Videocon has approached Essar to remain invested in Hutch with its 33% stake as the Indian partner.

Vodafone has also made similar offers to Analjit Singh and Asim Ghosh, the other existing shareholders and retain their combined stake of 12.26%. Vodafone has paid a price of around $794 per subscriber to clinch the deal. The valuation is in line with the $33 bn market capitalization of Bharti Airtel, the country’s largest private mobile services operator, and the $22 bn market capitalization of Reliance Communications, the second largest operator.

The acquisition will give Vodafone, which has over 200 mn subscribers globally, a strong presence in the fastest growing market for mobile services: Hutchison Essar has close to 24 mn customers.

In a related development, Vodafone has sold its 5.6% direct stake in Bharti Airtel to promoter Sunil Mittal for $1.6 bn. The deal was on a deferred payment basis. Vodafone will continue to hold an indirect 4.4% stake in the company, as a financial investor and will not have any representation on Bharti Airtel’s board nor any management rights.

Read The Economic Times and Business Standard articles.

Vodafone also in the race for Hutch

After Reliance, Maxis, Bharti and Essar itself, the Hutch-Essar JV seems to have found a new suitor. It seems that Vodafone, the British telecom giant, is reported to bid for Hutch-Essar. UBS, which is Vodafone’s house banker, is said to be advising the company on financing and acquisition strategies.

Both Vodafone and UBS have refused to comment on the development.

Vodafone is selling its stake in its holdings across market as it faces severe investor backlash. It sold its 25% stake in Swisscom for about $3.5 billion and a similar stake in a Belgian wireless operator to Belgacom; before that it had exited companies in both Sweden and Japan. The Japanese transaction was valued at about $16 billion.

In India, Vodafone has invested in a 10% stake in Bharti Airtel, the value of which now is estimated to be around Rs. 16, 000 crores. Vodafone might consider selling its stake in Bharti for financing the acquisition.

Read the article from The Economic Times.