Birla to buy out Tata, sell 33% in Idea

To pay Rs 4,406 cr to Tata group for acquiring their entire stake of 48.14%.

The Aditya Birla Group today announced that it would acquire the Tata group's entire 48.14 per cent stake in Idea Cellular for Rs 4,406 crore to upscale its stake in the company to 98.3 per cent.

For the Tata group, the deal has yielded decent returns on its investments in Idea. Sources close to the development said the Tatas had invested around Rs 1,500 crore in the company in 1997. C Sivasankaran, the former promoter of Aircel, will continue to hold 1.7 per cent in Idea, which has 6 million customers in 11 circles.

The Aditya Birla group also announced that it intended to sell a 33 per cent stake, after the acquisition, to financial institutions on the same terms offered to the Tatas. This sale will bring down the group's stake to over 65 per cent.

The buyout followed an offer from Maxis of Malaysia to acquire the Tata stake in the GSM operator. As the Idea shareholder agreement gave each partner the right of first refusal in case the other wanted to exit, the Tata group informed the Aditya Birla group of the Maxis offer, which, in turn, decided to match it.

Aditya Birla Nuvo, the recently-created company entrusted with growth in new businesses including telecom, will purchase 15 per cent from the Tata group, while Birla TMT Holdings will buy the balance 33.14 per cent stake. All the Birla entities will pay the same price "" Rs 40.51 a share "" for acquisition of the Tata stake.

At this price, the valuation of Idea stands at Rs 9,151 crore. Taking the company's debt of Rs 3,500 crore into account, the enterprise value becomes Rs 12,651crore. The company has an equity capital of Rs 2,259 crore.

The acquisition price is substantially higher than Rs 17.5 per share, the price the Birla and the Tata groups paid to buy out Cingular Telecom's stake few months ago. Post acquisition, the Tata group's holding went up to 48.14 per cent while that of the Birlas to 50.16 per cent.