Hutchison Telecommunications International Limited has decided to auction its 67% stake in Hutchison Essar through an open bidding process, similar to the one where Tata Steel outbid Brazil’s CSN to acquire Corus Group.
Vodafone Plc, Reliance Communications, and the Essar and Hinduja groups are in the race to acquire the stake, which will give them control of India’s fourth largest mobile telephony company.
According to sources close to the negotiations, HTIL plans to fix a minimum reserve price of $14 billion (Rs61, 600 crore) to eliminate non-serious bidders. They added that the enterprise value of the deal could be around $18 billion (Rs79,200 crore) to $20 billion (Rs88,000 crore) including debt of $1 billion (Rs4,400 crore) that is on the books of Hutch Essar.
Investment bankers expect the transaction to be closed at around $20 billion. Bharti Airtel has a current market value of around $33.5 billion or Rs 1,48,105 crore , and 32 million subscribers for its mobile service. Hutchison Essar has a subscriber base of 23.3 million.
In a recent report, UBS Investment Research has suggested that the ‘implied valuation’ of Hutchison Essar is $20 billion.
The sources said that only the Hinduja group was yet to complete its due diligence on Hutch Essar. After this was done, they said, HTIL would call for an extraordinary general meeting of shareholders in the third week of February to secure approval for selling its stake in Hutch Essar. If the shareholders approved the sale, HTIL would ask for bids and decide on the rules of the auction after consulting with the bidders. The auction is expected to take place before March 31.