Hutch-Essar sale gets Hutchison shareholders’ nod (Updated)

Hutch-Essar sale gets Hutchison shareholders’ nod (Updated)
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First Published: Fri, Mar 09 2007. 11 07 PM IST
Updated: Fri, Mar 09 2007. 11 07 PM IST
A proposed Indian buyout by Vodafone Group, the world’s biggest mobile phone services firm, received a fillip on Friday when shareholders of the Hong Kong company, whose stake it is acquiring, approved the sale even as an irked local partner said a decision on its cooperation would be taken soon.
Vodafone agreed to buy a two-thirds stake in Hutchison Essar, India’s fourth-largest cellular business, last month for $11.1 billion (Rs49,600 crore) in cash, buying out the target’s majority parent, Hutchison Telecommunications International Ltd (HTIL), from the venture. The transaction, the companies then said, would close in two months.
HTIL won the backing of its shareholders on Friday to sell its 67% stake to Vodafone. “Completion of the potential sale is expected to take place no earlier than 2 April 2007,” HTIL said in a statement after a shareholder meeting.
Shareholder assent for the deal was helped by HTIL’s parent Hutchison Whampoa, a shipping-to-telecom conglomerate that owns 49% of its shares, which voted in favour of the deal.
Mumbai-based Essar Group, HTIL’s local partner in Hutchison Essar and an owner of a 33% stake in the cellular firm, said it expected to conclude negotiations with Vodafone in 10 days.
“We expect the talks to get finalized in a maximum of seven to 10 days,” an Essar spokesman said.
Essar says it has a right of refusal on sale of the HTIL stake, a claim contested by Vodafone. The two sides are negotiating a set of clauses in a new shareholder agreement that protects the minority interests of the Ruias, the promoter-family at Essar.
In an unrelated development, Vodafone’s proposed acquisition of the HTIL stake got a temporary reprieve from the Delhi high court after it refused to entertain a plea by an NGO Telecom Watchdog, which alleges that the deal violates foreign ownership rules in telecom service companies in India.
Foreign stakes in such ventures is capped at 74%. Two Indian shareholders in Hutchison Essar—its chief executive Asim Ghosh and New Delhi businessman Analjit Singh—are figurehead representatives of HTIL, the petitioner alleges.
“(Since) the aforesaid matter is before FIPB and an inquiry is done by FIPB, we are not issuing any notice to the companies. The Centre and FIPB will decide the matter as expeditiously as possible within two months,” judges M.K. Sharma and Sanjiv Khanna were quoted as saying by a news agency.
FIPB or Foreign Investment Promotion Board is an apex body in the finance ministry that approves overseas ownership in some sectors. An FIPB official said the board is awaiting the Reserve Bank of India’s opinion on whether foreign direct investment norms have been violated by HTIL.
A legal expert was of the opinion that rules for investment in telecom law would be tested in the Hutchison Essar case. “It is a regulatory grey area. However, we are likely to see the rules evolve as we move along,” said Mahesh Uppal, a regulatory consultant to telecom firms.
Shares of HTIL lost nearly 1.75% to HK$15.7 (Rs88.55) on the Hong Kong stock market which saw the Hang Seng slip by 0.21%. The scrip has lost around 17% since the deal with Vodafone was announced.
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First Published: Fri, Mar 09 2007. 11 07 PM IST
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