India’s Essar group is understood to have tied up financing for a potential bid for the two thirds of its mobile phone joint venture with Hong Kong’s Hutchison Telecommunications International that it does not own.
The move underscores Essar’s potential as a serious bidder for Hutchison’s 67 per cent stake in their Indian joint venture – an outcome that would be bad news for rival bidders Vodafone and Reliance Communications.
The Indian conglomerate has lined up Morgan Stanley, Standard Chartered, Lehman Brothers and Citigroup to lead arrange the funding for a possible takeover of Hutchison Essar, India’s fourth largest mobile operator, people familiar with the matter said.
They said Essar, which has first refusal over any other Indian bidder but which has yet to decide whether to make a formal offer, had received funding pledges worth $20bn-$25bn.
The Financial Times reported last week that Essar had made an initial approach to Hutchison for its stake worth $11bn, valuing the company at about $16.4bn. That compares with an offer from Vodafone valuing the company at up to $18bn.
Vodafone, in particular, was increasingly playing a high stakes game, people close to talks related to rival bids said. They said the UK-based operator was keen to hammer out a deal with Hutchison even without co-operation from Essar.
Essar and Standard Chartered declined to comment. Citigroup, Morgan Stanley and Lehman Brothers were unavailable for comment.
People close to talks related to rival bids were sceptical about the ability of Essar, which has an enterprise value of $15bn, to raise that level of financing for a proposed deal.
However, the people familiar with Essar’s plans said Hutchison Essar, with debt of only about $1bn, could potentially carry some of the burden.