Mumbai, Dec 18: The prowling predators are finally preparing to pounce: Anil Ambani is expected to launch a formal bid for Hutchison Essar Ltd (HEL) this week with many speculating that it could come as early as tomorrow.
Ambani’s move comes amid reports that senior officials from Maxis Communications of Malaysia are in Hong Kong conferring with Hutchison Telecom International (HTIL), which has a 67 per cent direct and indirect stake in HEL.
Ambani is being widely tipped as the front runner in the race to acquire India's fourth-largest wireless telephony operator with a subscriber base of over 20 million.
But there are others in the fray as well and, as of now, everyone fancies his chances.
Ambani, who heads the Rs 10,500-crore Reliance-Anil Dhirubhai Ambani Group (R-ADAG), was widely expected to make a formal bid this week. Sources said he is likely to formally inform Hutchison that he aims to acquire the entire stake in HEL.
The Essar group holds 33 per cent of Hutchison Essar Ltd (HEL) and no deal can go through without their consent. The Ruias, who have never been great friends of the Ambanis, are putting together their own bid for HTIL’s stake.
Under the terms of the agreement with HTIL, the Ruias have the first right of refusal should HTIL wish to sell its stake in Hutchison Essar.
Indications that Ambani may come out with a bid for Hutch-Essar were available on Sunday when he and mother Kokilaben Ambani visited Tirupati temple.
“What a better day than to begin on Tuesday,” sources said. Many Hindus regard Tuesday as very auspicious to launch projects.
Reports say the younger scion may make a $12-billion to $13-billion bid for the entire 100 per cent stake in Hutchison Essar.
Reliance-ADAG is also understood to have tied up with four banks to fund a part of the deal even as it started negotiations with some private equity funds. It is felt that though Ambani will first make the bid, he will get into the nitty gritty only after winning it.
When contacted, a spokesperson for R-ADAG said that he was not aware of the younger scion planning to make a formal bid tomorrow.
If the deal indeed goes through, it will be India's largest acquisition till date. Observers are of the view that the buyout will only act to the advantage of Reliance Communications Ltd (R-COM).
“If R-COM can buy out Hutch, it will be catapulted to India’s largest wireless operator with a market share of 36.3 per cent. This acquisition makes strategic sense as Hutch affords R-COM overnight entry into 16 GSM circles.
R-COM is in any case planning to roll out new GSM operations in 14 circles to create a pan-India GSM business, shifting its focus from CDMA. This acquisition will enable R-COM to reduce the time to market with a pan-India GSM offering,” said Macquarie Securities India in a research note.
Macquarie estimates Hutch-Essar’s enterprise value (EV) at $13.79 billion.
Orascom feels that the Indian partner in the mobile service joint venture Hutch-Essar should have been consulted by Hutchison Telecom before it was taken on board the joint venture.
Orascom CEO Naguib Sawiris said, “They (Essar) felt bad because they thought they were not consulted before (the Egyptian firm) came on board. I am open to meet Essar officials for clearing their position.”