VSNL to acquire Teleglobe for $239M

By agencies   |   Tuesday, 26 July 2005, 19:30 IST
Printer Print Email Email
MUMBAI: Barely a month after it announced the closure of its acquisition of Tyco Global Network for $130 million, India’s largest long distance carrier Videsh Sanchar Nigam Limited (VSNL) has entered into an agreement to acquire Teleglobe International Holdings Ltd for $239 million. This acquisition cost includes an assumed debt of $61 million and the transaction price of $178 million for 100 percent stake in the Bermuda-based Teleglobe, which has most of its operations in Canada. In fact, Teleglobe was once the incumbent international long distance carrier in Canada, but later fell into bad times and had to go in for restructuring. (The company last year reported gross profit of $19 million and a net loss of $38 million.) VSNL will pay $4.50 per share to Teleglobe shareholders, offering a 22-percent premium to the current market capitalization of the company that is listed on the Nasdaq. VSNL will buy 66 percent equity stake from private equity investor Cerebrus. The acquisition will be through amalgamation of Teleglobe with VSNL International (Bermuda), a subsidiary of VSNL. The other shareholders will automatically sell to VSNL, as facilitated by Bermuda regulations, said Rajiv Dhar, Chief Financial Officer, VSNL. This acquisition will put VSNL among the top three companies in the world in terms of international wholesale services, and make it a leading player in terms of telecom services encompassing the wholesale, enterprise and retail sectors, said N. Srinath, Director, VSNL. The Tyco Global Networks (TGN) buy made VSNL the biggest supplier of submarine cable connectivity in the world. Teleglobe's wholesale voice/voice-over-Internet-protocol, and Global Tier-1 IP network can be overlaid on the TGN network to provide value-added services to enterprise customers across the globe, he said. (Teleglobe made an important acquisition in VoIP-leader ITXC Corp in May last year.) Teleglobe has an extensive global network that reaches more than 240 countries and territories with advanced voice, data and signaling capabilities and ownership interests or capacity in more than 80 sub-sea and terrestrial cables, said a statement from VSNL. Through Teleglobe, VSNL will be able to access more than 200 direct and bilateral agreements with leading voice carriers, many of them incumbent carriers within their countries or large international wireless service providers. In addition, VSNL also gains an international workforce. As a global operator, VSNL requires scale and acquisitions to facilitate this, said Srinath. As with TGN, this acquisition too may take three or four years to break even. The acquisition is subject to the approval of Teleglobe shareholders, as well as the authorities in the U.S., Canada and some other countries.