Hughes seeks help in bid for News Corp stake

By SiliconIndia   |   Thursday, 25 March 2004, 08:00 Hrs
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MUMBAI: The management of Delhi-based Hughes Software systems (HSS) is trying to put together a bid for News Corp’s 55.4% stake in the company, reports Economic Times.

The management of the telecom software services company is trying to get the support of private equity investors CDC Partners and Warburg Pincus. But no deal has been finalised yet, sources said. Mumbai-based investment firm Kotak Capital is structuring a bid for the News Corp stake, sources said. The management bid would also include an accelerated exercising of employee stock options that would increase the employees’ stake. Details, however, were not available.

Sources said that the merchant bankers appointed by News Corp, Mumbai-based DSP-Merrill Lynch, had already received about six bids. The bidders ¬ó mostly international ¬ó include both strategic and financial investors.

ET had reported on March 2 that News Corp was interested in selling its 55% stake.

Besides the management, Wipro and Infosys have also evinced interest in buying the News Corp stake and have submitted their bids. Wipro seems to prefer a stock bid to a cash purchase. Its telecom and internetworking division competes against Hughes for business.

News Corp had acquired a 55.4% stake in Hughes Software in April ’03 as part of the $3.8-bn acquisition of parent company Hughes Corp. Hughes Corp held equity directly in Hughes Software, as well as through its investment company in Mauritius and Hughes Networks. The acquisition of Hughes Corp gave News Corp a controlling stake in Hughes Software and Hughes Networks. News Corp acquired Hughes Corp from automobile giant General Motors.

Based on today’s market price HSS has a market cap of Rs 1,825 crore, 55% of which is around Rs 975 crore. A strategic sale would typically be at a premium to the market price.

Wipro was competing with Hughes during the recent sale of Lucent’s GSM UMTS development project. The UMTS project is seen as a feather in the cap of Hughes as Lucent has fully outsourced the technology development and upgrades for its existing GSM customers to Hughes. Lucent is focusing more on its CDMA technology roadmap now.

The biggest reason for Wipro’s interest in Hughes is due to the work it has done in advanced technologies.

Contrary to reports, Nokia is not interested in buying a stake as it might create a conflict with the existing customer base of Hughes. Some of Hughes’ largest customers are companies like Lucent and Nortel which are Nokia’s competitors. Microsoft has also not evinced any interest in the company as a telecom software services company does not fit in with the existing product portfolio of the company.

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