Essar-Vodafone locked at $14-b over Hutch deal
By siliconindia   |   Thursday, 04 January 2007, 18:30 IST
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NEW DELHI: In the long-stretched drama over the acquisition of Hutchison Essar, Essar is learnt to be willing to buy Hutchison Group’s 67 percent stake in Hutchison Essar (HEL) for around $14 billion, reported The Economic Times today. It further stated that the company was waiting for Vodafone and other contenders to submit their bids before making a formal offer. The aggressive stand adopted by the Ruias in pursuing with buyout efforts of Hutch has helped Vodafone’s shares rise by about 2.5 percent over the last two days. Interestingly, after its announcement on December 21 of its interest in HEL, Vodafone’s shares fell 1.6 percent — from 143.45 pence on December 21 to 141.5 pence on December 29. After it came to light that Essar was a serious player, and that the Ruias will use the right of first refusal (ROFR) clause to thwart Vodafone’s offer, also in the range of $14-billion, the company’s shares have risen. On Wednesday, Vodafone’s shares were trading at 145 pence at 16:15 GMT, after touching a high of 147.35 pence Though there is some ambiguity the scope of the ROFR, sources close to Essar say that it is all-inclusive and covers all foreign bidders. “The Essar Group prefers to buy out Hutch’s stake in Hutch-Essar and has valued the company at $21-22bn. For this, it is looking at borrowing about $13 billion — the financing pledges that it has received is far in excess of this requirement,” a source ET. It had earlier been reported by the publication that the Ruias have got comfort letters from their bankers for financing pledges of over $20bn and were currently engaged in advanced talks with their bankers — Morgan Stanley, Standard Chartered, Lehman Brothers and Citigroup — to finalize the structure of the consortium and the amount that will be committed by each member. The Essar spokesperson refused to comment. In a development closely related to the Hutch saga, JP Morgan cautioned Vodafone saying that its “continued involvement in the bidding process might threaten the company’s stated M& A criteria”. It stated that in the event of Vodafone’s opting out, investors would return, but at the same time, its inability to secure Hutch Essar would question the company’s emerging market focus. These developments notwithstanding, Vodafone sources told ET that the company is still very much in the race.