Over Rs 60,000 crore for Hutch to sell out

By SiliconIndia   |   Thursday, 28 December 2006, 06:00 Hrs
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Chennai/Mumbai: Hutchison Whampoa in bid to sell out Hutchison Essar Ltd has informed that it will accept offers only in excess of $14 billion (over Rs 60,000 crore). It has come to light that the Essar group has made an offer to buy out Hutchison group's 67 percent stake in Hong-Kong-based company.

Sources close to the development, gave inputs that the offer was made in Hong Kong earlier in the week. But the size of the offer was still unknown. The Essar group has 33 per cent stake in the joint venture.

Analysts felt that the Hong-Kong-based Hutchison Whampoa’s announcement will make the Indian bidders fortify their fund-raising process further.

According to the valuation Essar would have to pay more than Rs 40,000 crore for 67 per cent stake. On the other hand, Indian telecom players like Reliance Communications would have to pay much more to acquire 100 percent of Hutchison Essar. Sources indicated that Rel Com had tied up with private equity investors to increase its offer.

Analysts explained that raising funds and structuring such a large deal would be a mammoth task for the Indian players. Reports floating in the market suggested that both the Indian players have tied up lines of credit in the region of $10 billion each, some of them getting equity support from private equity players.

"A single group would find this difficult," said top official at an Indian public sector bank. "Of course such a buy cannot be done using pure debt. Apart from private equity support, which could be considerable given the size of international private equity companies, Indian groups would also raise their own funds in a manner that could involve exchange of equity of their existing group companies, said the banker.

The only other company, the UK-based Vodafone, has made known of its intention to acquire Hutch-Essar.

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