By Abhineet Kumar
Mumbai: According to preliminary bids that were sent in to Hutchison Telecom International Ltd (HTIL) Friday night, Vodafone Group, Reliance Communications, the Essar group and the Hinduja group are among bidders for a two-thirds stake in Hutchison Essar, India’s fourth-ranked cellular operator. Their bids, sources close to matter said, value the entire company at between $17billion and $20 billion.
The offers to HTIL, Hutchison Essar’s parent in Hong Kong, are “preliminary, price-exploring” bids and will be used by the seller and its advisers to set the tone for final negotiations with shortlisted suitors, investment banking sources said.
HTIL, part of the Hutchison Whampoa group controlled by billionaire Li Ka Shing, “will select two or three bidders based on the prices they tender and will then ask them to better the bids,” one banker told Mint, on the condition of anonymity. If Vodafone, the world’s biggest mobile phone company by revenues, or one of the others put in an offer significantly higher than competing offers, it will get the rights to exclusively negotiate with HTIL, another added.
An enterprise value of $20 billion for HTIL values the 67% stake controlled by the company and its representatives in Hutch Essar at $13.4 billion. Essar owns the remaining 33% in the target company.
HTIL spokeswoman Laura Cheung said her company would not comment on when it expects to receive bids. Both Vodafone spokesman Bobby Leach and Manisha Girotra, the India head of investment bank UBS, advisor to Vodafone,declined to comment. Eddie Naylor, a spokesman for Goldman Sachs, which is advising the Hong Kong seller in the deal, did not return calls.
Vodafone is looking to acquire Hutchison Essar to get a strong toehold in the fastest growing telecom market in the world. The Indian government has predicted the country will have 500 million mobile phone customers, up from over 150 million today, 22% of who are on the Hutchison Essar network.
Reliance Communications, the second-largest mobile phone company in India, has completed its diligence of Hutchison Essar. Company spokesmen were unwilling to comment on whether Reliance had put in a bid or not.
Essar, which is being advised by Standard Chartered and Citigroup, has lined up debt funding for the deal, its director Prashant Ruia had told Reuters on Thursday.
The local unit of Merrill Lynch, which was one of Essar’s advisers in the deal, has withdrawn, banking sources said , but Mona Kwatra, spokeswoman for the investment bank refused comment.
The steel-to-oil group claims it has a first right of refusal on the HTIL stake if it can match the best bid. “Essar is a very strong contender for the stake given that it is a partner. Whoever bids for the HTIL stake will need to have Essar’s consent,” said a telecom industry executive, who did not wish to be named.
The Hinduja group, which was still studying the finances and operations of Hutchison Essar as part of its due diligence, has put in a bid, company chief financial officer Prabal Banerjee said, while an industry source added that it was between “$17 billion and $20 billion”. The Hinduja-controlled IndusInd Bank is advising the suitor.