New Delhi: Telekom Malaysia International Berhad or TMI is looking to own a 20% stake in the merged entity of Idea Cellular Ltd and Spice Communications Ltd and is willing to invest up to $1.6 billion (Rs6,864 crore) to acquire this, said a person familiar with this development who did not wish to be identified.
This is one of the two options being weighed by the Modi-family controlled Spice. The other option involves a sell-out to Bahrain Telecommunications Co.
TMI already owns a 40% stake in Spice and the person said that a 2:1 swap ratio with Idea (two shares of Spice for one Idea share) would give the company around a 4% stake in the combined entity. “Telekom Malaysia is valuing the merged Idea-Spice entity at $10 billion and is eyeing a 20% stake,” the person added. That would mean TMI spends $1.6 billion to up its stake to 20%.
“It is now for TM to convince Birla’s for the deal, as they want to sell their stake and exit India if the deal does not happen with Idea,” this person said.
Idea Cellular is currently valued at more than $6 billion.
According to this person, the Modis are asking for Rs77 a share.
Datuk Yusof Annuar Yaacob, group chief financial officer of TMI, said his company was looking at multiple options to close the deal. “We have not received any offer from anybody,” he said denying reports that Batelco had written to TMI offering to buy out its stake in Spice. “TMI’s perspective is looking at a route at activating the growth in a market like India, and primarily through merger,” he said.
Apart from investing in the merged Idea-Spice entity, TMI would also consider bringing in another partner, likely one of its Asian partners or associates, to invest in the company, Yusof added.
A Mumbai-based analyst who did not want either his or his employer’s name to be mentioned said the deal was close to being finalized although valuation remained an issue. He added that investors considered an offer of even Rs60 a share for Spice is high and that Rs77 would be exorbitant and “have a negative influence on Idea’s shares.”
Sanjeev Aga, managing director of Idea Cellular Ltd, said he had nothing to say.
Shares of Spice closed 3.8% up at Rs57.50 each on the Bombay Stock Exchange, while those of Idea closed 2.5% down at Rs97.10 each.