Hutch cup final: Vodafone takes on RCL
Let’s take a Christmas break. As India-born Vodafone chief executive Arun Sarin, with the backing of his board, prepares to take on Anil Ambani for control of Hutch-Essar’s Indian business, and probably Malaysia’s Maxis too, expectations that the company would present a bid as early as Friday went slightly off the mark. Vodafone announced that it is considering an acquisition but gave no price or details.
Vodafone’s move has spurred frenzied activity among private equity funds and strategic bidders such as Reliance Communications (RCL) and Maxis. Two separate bidding groups have formed to take on the Newbury, England-based giant and strike India’s largest takeover. RCL, India’s second-largest wireless company, New York-based Blackstone and Washington-based Carlyle, the largest US buyout fund, are part of one consortium, with the Mumbai-based company at the helm.
The other has David Bondermann’s Texas Pacific Group (TPG) once again teaming up with Maxis to make a second pitch for Hutch-Essar.
Two weeks back, the TPG-Maxis combine had seen its $13.5-billion bid being rejected by Hutchison.
TPG has the lead role in this group.
The plans of Kohlberg Kravis Roberts & Co (KKR), the legendary buyout firm, which was earlier in talks with Reliance, is not clear. Egyptian telephone firm Orascom is also believed to be sniffing around but no details could be ascertained.
The developments take the battle for Hutch Essar into a more concrete stage. After several weeks of talks and confabulations, the various bidders are now ready to put a price on the table, in one of the most keenly-watched and hotly-contested races in India, over the next 10 days or even sooner. Formal bids will be placed only after a proper due diligence is conducted.
These moves also come in the wake of India adding over six million mobile subscribers per month and the overall subscriber base likely to touch 170 million by March 2007 – more than the population of Japan and over twice that of the UK. And just over 10% of India’s population owns a mobile phone while the figure for the US is 70%, a survey by Gartner has shown. Other surveys have also shown that every person in western Europe owns a mobile phone.
Vodafone, at this stage, seems to have an edge over others as its bid will not place any constraints upon Hutchison. Under the shareholders agreement between Hutchison and Essar, the Ruia-promoted group enjoys the first right of refusal if Hutchison were to sell its stake to any of the Indian bidders.
There are no such constraints in case of a foreign buyer. Hutchison, if the price is right and in the absence of a higher offer, can sell its 67% in the company to Vodafone, thereby shutting everybody out of the race.
“Vodafone’s entry has spoiled everybody’s plans,” one of the bidders told ET. With its massive cash reserves (its 2007 cash flow is estimated at £4.7-5.2 billion) and global scale, Vodafone has the ability to swoop down and take over the company.
“The board of Vodafone is considering the acquisition of a controlling interest in Hutch Essar in India. Such a transaction would be consistent with its stated strategy of seeking selected acquisition opportunities in developing markets,” the company said in a statement.
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