Essar, Vodafone open cards

Ruias value Hutch-Essar at $16.5 bn, Vodafone $17 bn.

The Essar group, the joint venture partner in Hutchison-Essar Ltd, has offered $11 billion (about Rs 50,000 crore) for Hutchison Telecom International's 67 per cent stake, pegging the venture's enterprise value at $16.5 billion.

Vodafone, one of the world's largest mobile operators, has submitted an offer valuing the company at $17 billion.

No comments were forthcoming from Essar, Vodafone and the Hong Kong-based Hutchison Telecom International Ltd.

Investment bankers close to the development said Vodafone had put in a bid that valued Hutchison-Essar at $17 billion. Vodafone had also told Hutchison Whampoa that it would spend another $2 billion after the acquisition, on expansion in India.

They added that Ravi Ruia, vice-chairman of the Essar group, had offered to pay $11 billion for Hutchison's stake, valuing Hutchison-Essar at $16.5 billion.

Reliance Communications Chairman Anil Ambani today officially threw his hat into the ring by saying the acquisition of Hutchison-Essar fitted into his company's growth strategy.

He said Reliance Communications had received commitments from financial institutions and private equity funds for financing a bid.

"A potential combination between Hutchison Essar and Reliance Communications would create tremendous value for shareholders."

Ambani was reluctant to disclose details of the financing proposals he had received from P-E funds and institutions. On whether he would like to partner Essar, he said it was premature to comment. However, he said he had partners across the globe, such as Orascom in Egypt and Qatar Telecom in Qatar.

"Telecom's is a borderless world and we are comfortable with any partner," he added. The Ruias, promoters of the Essar group, are working out a deal in which its consortium of bankers would pick up between 20 per cent and 30 per cent of Hutchison's equity.

Merchant banking sources said the bankers had expressed willingness to rustle up over $5 billion to buy equity directly. To buy the remaining portion of Hutchison's equity, the bankers would fund the Ruias with debt.

By employing this strategy under which they had to buy only between 37 per cent and 47 per cent of the Hutchison stake, the Ruias might not need a large war chest of funds.

The valuation of the company, based on its enterprise value, had been going up and could vary between $17 billion and $21 billion, merchant bankers said.

Sources said that while the Ruias had begun discussions with the Hutchison brass, they were waiting for the latter to come up with an indicative price (based on what other aspirants like Reliance Communications, Vodafone, and Maxis offered) that they had to match or better.

"The Ruias have been talking to the Hutchison brass virtually twice a day, as they have the first right of refusal. Based on what other competitors offer, Hutchison will get back to them with the price they have to match. If they do, Hutchison might again go back to the other aspirants to see if they can increase their indicative bids.

This process could take some time," merchant banking sources said.

Many international bankers are common to the various players in the race, having offered lines of credit to all of them "" rather than going in for just one player.

However, Reliance had tied up deals with some merchant bankers exclusively as part of its strategy, sources said.