Idea buys Spice for Rs 2,176 crore
Mumbai, June 26: In one of the biggest deals in the Indian telecom sector, Aditya Birla group's Idea Cellular on Wednesday said it would acquire BK Modi's Spice Communications to strengthen its position in the growing telecom market. The deal consists of four related, but distinct transactions.
Indiablooms News Service
To begin with, Idea will acquire the Modis' 40.8% stake in Spice. Subsequently, Idea will launch the mandatory 20% open offer for the Spice shareholders, jointly with Telekom Malaysia International (TMI).
Idea will merge Spice with itself and offer a 14.99% stake to TMI through a preferential allotment. Idea will earn Rs 7,294 crore ($1.7 billion, assuming an exchange rate of Rs 43) by selling this stake to TMI. This would make it one of the largest infusions of FDI into India.
Idea has agreed to buy the Modis' 28.14 crore shares for Rs 77.30 each, totalling Rs 2,176 crore. In addition, it will shell out Rs 544 crore, or over Rs 19 a share, to the Modis as a non-compete fee. This is under the 25% limit (with reference to the open offer price to non-promoter investors) prescribed by Sebi for any such payment.
The 14.99% preferential allotment to TMI will ensure that Idea, despite being the purchaser, ends up as a net gainer in the transaction. The net income for Idea, after making payment to the Modis, will be Rs 4,574 crore.
The Idea-TM combine will launch the open offer at Rs 77.30 jointly with TMI, which now holds 39.2%in Spice. At this stage it is not clear who will pick up how much. Idea will earn Rs 7,294 crore by selling 46.47 crore preferential shares to TMI for Rs 156.96 apiece.
According to the merger formula, Spice shareholders will get 49 Idea shares for every 100 shares they held. The payment to the Modis is being funded through internal accruals. After completion of the deal, which is expected to be done in next six months, Idea's equity base will be expanded due to issue of fresh shares to TMI, and also because of the share swap.
On Wednesday, Idea scrip closed at Rs 102.05, up 2.9% while Spice scrip touched an all-time high of Rs 73.40, before closing at Rs 72.35, a 33% gain over the previous day's close.
Newspapers reported June 10 that Spice shares will be acquired by Idea at between Rs 77 and Rs 78 per share. On June 12, we reported that TMI will buy just under 15% stake in Idea through preferential offer and will hold around 20% in the merged entity.
"Spice will be delisted and TMI's holding in the new Idea (post-merger) will be a maximum of 20% (depending on the response to the open offer) and one non-executive board seat," AV Birla group chairman Kumar Mangalam Birla told The Economic Times.