Realty firm’s telecom unit could seal $1.4-bn deal by weekend.
A leading European telecom giant is set to acquire a little over 43 per cent stake in Unitech’s telecom venture for $1.4 billion. According to highly-placed sources close to the deal, the legal documentation is likely to be completed shortly and an announcement to this effect is expected by the weekend, or early next week.
Unitech was in talks with three major telecommunication giants, including Italy’s Telecom Italia and Norway-based Telenor. Telecom Italia, it is learnt, is no longer in the race due to differences over valuation and the management structure of the company.
Besides the Continent, the European company is a strong player in some of the emerging markets in Asia. With its entry into India, the company will be one of the leading foreign players in South-East Aisa.
Sources said the European company would eventually increase its holding to a majority level at a fair market price. According to the initial understanding, both the partners will have an equal representation on the board with an independent chief executive officer.
“The chief financial officer will be appointed by the foreign partner, while the executive chairman will be nominated by Unitech,” sources said. UBS Investment Bank is advising Unitech.
A high-level management of the European company is expected to visit the country early this week to conclude the deal and make a formal announcement, sources said.
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Sources said investment by the foreign company would peg the equity value of the telecom joint venture at $3.2 billion, equivalent to Rs 15,840 crore, as against Unitech’s market capitalisation of Rs 12,900 crore last Friday.
Unitech’s holding in the joint venture would be valued at around Rs 9,000 crore. Under the deal, Unitech, which has advanced a debt of Rs 2,000 crore in the telecom venture, would convert the debt into equity shares worth Rs 450 crore, while retaining the balance of Rs 1,550 crore as debt. The debt would be returned by the joint venture to Unitech over the next few quarters, sources added.
The current paid-up capital of the joint venture is Rs 138 crore, which is owned by Unitech. Post-transaction, the JV’s paid-up capital would be close to Rs 750 crore and its networth would be of Rs 7,500 crore, they said.
The proceeds from a private placement of the joint venture would be used for laying down the network, rolling out operations as well as bidding for the 3G spectrum.