Essar springs surprise offer for Hutch
The Essar group has made a $17-18 billion offer to buy the Hutchison group’s 67% stake in Hutch-Essar.
By TNN |
MUMBAI: The Essar group has made a surprise offer to buy the Hutchison group’s 67% stake in Hutchison-Essar at an estimated enterprise value of $17-18 billion. The offer was made through the group’s advisors, Morgan Stanley and Bear Stearns, who met senior Hutch officials in Hong Kong on Tuesday, investment bankers familiar with the meeting told ET.
The Essar group is believed to have received funding from Morgan Stanley and Citibank. Both US-based giants are believed to have given a line of credit to Essar of about $10 billion.
Essar’s move raises the stakes in the battle for Hutch-Essar. Other prospective bidders are now left with a stark choice - either offer more than Essar or prepare to withdraw. It also means that Hutchison cannot sell its stake to an Indian bidder (read Reliance Communications) without giving Essar the right to match it. Vodafone said last week that it is interested in pursuing the acquisition of Hutch-Essar. The Essar group’s latest move means that Vodafone also will have to think carefully about its next moves.
Vishal Kampani of JM Morgan Stanley was also present at the meeting with Hutch. The Hutchison group’s response to the offer is not known. Essar group director Prashant Ruia and vice-chairman Ravi Ruia could not be contacted for their comments. An Essar group spokesperson in Mumbai declined to comment.
The Essar group does not have to buy the entire 100% stake as it already owns 33%. At a valuation of about $18 billion, the group will have to cough up $11 billion (Hutch-Essar is believed to have a debt of about $1.4 billion) for its 67% stake. The Essar group has been trying to raise money from various banks, private equity funds for the transaction for quite some time. It had held talks with Telenor of Norway, Qatar Telecom, Kuwait Telecom and other strategic players.
But with its 33% stake, the Essar group always held all the cards in this battle. It had three options before it. One, to buy Hutch’s stake; two, to sell its own holding; and three, to stay on as a partner with somebody like Vodafone.
The Mumbai-based oil-to-telecom group has the first of refusal in case Hutchison Essar decides to sell its 67% to any of the three Indian companies - the Bharti group, the Tata group and Reliance. Hutchison is free to sell its stake without offering it first to Essar in case of a foreign bidder.
Others interested in the company include Vodafone, a consortium led by Reliance Communications and comprising Blackstone and Carlyle, and a Texas Pacific-led consortium with Malaysia’s Maxis.
Talks are now on between the prospective bidders and Hutch advisor Goldman Sachs. No formal bids have been placed by anybody except Essar. The companies want to do a proper due diligence and are waiting for Hutchison to open its books.
The Essar group is believed to have received funding from Morgan Stanley and Citibank. Both US-based giants are believed to have given a line of credit to Essar of about $10 billion.
Essar’s move raises the stakes in the battle for Hutch-Essar. Other prospective bidders are now left with a stark choice - either offer more than Essar or prepare to withdraw. It also means that Hutchison cannot sell its stake to an Indian bidder (read Reliance Communications) without giving Essar the right to match it. Vodafone said last week that it is interested in pursuing the acquisition of Hutch-Essar. The Essar group’s latest move means that Vodafone also will have to think carefully about its next moves.
Vishal Kampani of JM Morgan Stanley was also present at the meeting with Hutch. The Hutchison group’s response to the offer is not known. Essar group director Prashant Ruia and vice-chairman Ravi Ruia could not be contacted for their comments. An Essar group spokesperson in Mumbai declined to comment.
The Essar group does not have to buy the entire 100% stake as it already owns 33%. At a valuation of about $18 billion, the group will have to cough up $11 billion (Hutch-Essar is believed to have a debt of about $1.4 billion) for its 67% stake. The Essar group has been trying to raise money from various banks, private equity funds for the transaction for quite some time. It had held talks with Telenor of Norway, Qatar Telecom, Kuwait Telecom and other strategic players.
But with its 33% stake, the Essar group always held all the cards in this battle. It had three options before it. One, to buy Hutch’s stake; two, to sell its own holding; and three, to stay on as a partner with somebody like Vodafone.
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The Essar group had been silent for the past few weeks ever since Reliance Communications, Maxis and private equity groups started showing interest in bidding for Hutchison Essar. The silence had sparked speculation that the Essar group may perhaps sell its stake or even stay on with Vodafone. Ravi Ruia’s visit to London last week only heightened the rumours.The Mumbai-based oil-to-telecom group has the first of refusal in case Hutchison Essar decides to sell its 67% to any of the three Indian companies - the Bharti group, the Tata group and Reliance. Hutchison is free to sell its stake without offering it first to Essar in case of a foreign bidder.
Others interested in the company include Vodafone, a consortium led by Reliance Communications and comprising Blackstone and Carlyle, and a Texas Pacific-led consortium with Malaysia’s Maxis.
Talks are now on between the prospective bidders and Hutch advisor Goldman Sachs. No formal bids have been placed by anybody except Essar. The companies want to do a proper due diligence and are waiting for Hutchison to open its books.
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