VSNL buys Teleglobe for $239 mn

VSNL intends to set up subsidiary in Bermuda & merge Teleglobe with it.

Videsh Sanchar Nigam Ltd (VSNL) today signed an agreement to acquire Bermuda-registered Teleglobe International Holdings Ltd for $239 million.

This will be its second overseas acquisition, after the Tyco Global Network (TGN) takeover in November last year for $130 million.

The acquisition would make VSNL a leading player in wholesale voice, bandwidth and enterprise data market, VSNL Director (Operations) N Srinath told reporters today. A Nasdaq-listed entity, Teleglobe is a leading provider of wholesale voice, data, internet protocol (IP) and mobile signaling services.

VSNL intends to set up a wholly-owned subsidiary in Bermuda, VSNL Telecommunications (Bermuda) Ltd, and merge Teleglobe with the new company. The deal is subject to approvals from various governments, Srinath said.

VSNL is buying out Teleglobe's largest shareholder Crberus, a venture capital company, at $4.50 per share, a 20 per cent premium on its Nasdaq price. This will amount to $178 million. Besides, VSNL will take over $61 million worth of debt of Teleglobe.

VSNL expects the acquisition to be completed in the next seven to eight months. "We will recover the cost in the next four to five years," Srinath said. The Tata group company intends to synergise the new company's operations with TGN which operates an undersea cable network that spans 60,000 kms and the continents of North America, Europe and Asia.

The acquisition will give VSNL access to an extensive global network of Teleglobe that touches over 240 countries and territories with advanced voice, data and signaling capabilities, and ownership interests or capacity in more than 80 subsea and terrestrial cables.

The telecom major will also have access to over 200 direct and bilateral agreements with leading voice carriers and incumbent carriers in many countries.

Headquartered in Hamilton, Bermuda, with an operating centre in Montreal, Canada, Teleglobe also has more than 1,400 wholesale customers and carries over 13 billion minutes of voice traffic globally. VSNL, which clocks over 3 billion minutes per year, expects to get the 13 billion minutes garnered annually by Teleglobe.

Standard Chartered Bank acted as the financial adviser to VSNL, in connection with the transaction, while Kelley Drye and Warren served as the counsel to VSNL.

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• VSNL intends to set up a wholly-owned subsidiary in Bermuda and merge Teleglobe with it
• It will buy out Teleglobe's largest shareholder Crberus at $4.50 per share, a 20% premium on its Nasdaq price.
• The acquisition is likely to be completed in eight months and the cost recovered in five years