Vodafone protests Essar's reverse listing

MUMBAI: Vodafone locked horns with its Indian partner, Essar, on Tuesday. The UK-based company wrote to the stock exchange regulator, Securities and Exchange Board of India, and the Bombay Stock Exchange objecting to the reverse listing of an Essar subsidiary, Essar Telecom Holdings, which holds 11% in Vodafone Essar.

In an uncharacteristically aggressive letter, Vodafone said shareholders of the listed company into which Essar Telecom was being merged did not have sufficient information to appropriately value the stake.
The Essar group plans to merge Essar Telecom Holdings into India Securities—a listed company—creating a backdoor entry for investing in Vodafone Essar.

However, Vodafone said India Securities shareholders were only partly informed of Essar’s option to sell its stake. As per the agreement, Essar can offer its entire 33% in Vodafone Essar for $5 billion, but should it tender less than that, the stake would be separately valued by bankers. The vested 11% stake in India Securities may have a different value than a third of the put option value of $5 billion.

The Essar group is likely to only part-tender its stake in Vodafone Essar to Vodafone as part of the pre-agreed option for the Indian conglomerate that expires in May, said a senior official.