ID :
172260
Thu, 03/31/2011 - 16:40
Auther :
Shortlink :
https://oananews.org//node/172260
The shortlink copeid
Essar exits Vodafone-Essar JV for USD 5 billion
New Delhi (PTI) Putting an end to the
corporate battle, UK-based Vodafone Thursday announced it
would exercise the option to acquire its Indian partner
Essar's 33 per cent stake which will result in payment of USD
five billion.
With this, Vodafone may have to look for another
domestic partner to remain compliant with the FDI norms in the
telecom sector of a maximum stake of 74 per cent.
"Vodafone Group announces that the Essar Group has
exercised its underwritten put option over 22 per cent of
Vodafone Essar Limited (VEL).
"Following the exercise by the Essar Group of its put
option, Vodafone has exercised its call option over the
remaining 11 per cent of VEL owned by the Essar Group,
resulting in a total cash payment of USD 5 billion," Vodafone
said in a statement.
Call Option allows an investor the right but not the
obligation to buy a stock, bond, commodity or other instrument
at a specified price within a specific time period.
On the other hand, Put Option is an option contract
giving the owner the right but not the obligation to sell a
specified amount of an underlying security at a specified
price within a specified time.
With this, Essar will exit completely from the joint
venture, which is offering nationwide mobile services in
India. Vodafone has over 130 million subscribers and is the
third largest operator in India.
Vodafone also said that final settlement is
anticipated to be completed by November, 2011.
Sources in the know said that the completion of deal
would be subject to meeting certain conditions which include
Reserve Bank of India's permission as well as valuation of the
deal.
The final shareholding pattern post this deal was not
provided by the company as it was not clear whether
Vodafone's stake would exceed the 74 per cent FDI limit.
Vodafone had entered Indian market in 2007 when it
bought Hutchison's stake in the joint venture for over USD 11
billion and after that it had entered into an agreement with
Essar for a call and put option for its stake.
The two firms were locked in battle over Essar's plan
to list a firm that had part stake in the joint venture to
find out market value of its 33 per cent stake.
The move was opposed by Vodafone saying this may not
give true value of Vodafone's stake. It had approached the
market regulator SEBI and also filed a petition in the Madras
High Court.
corporate battle, UK-based Vodafone Thursday announced it
would exercise the option to acquire its Indian partner
Essar's 33 per cent stake which will result in payment of USD
five billion.
With this, Vodafone may have to look for another
domestic partner to remain compliant with the FDI norms in the
telecom sector of a maximum stake of 74 per cent.
"Vodafone Group announces that the Essar Group has
exercised its underwritten put option over 22 per cent of
Vodafone Essar Limited (VEL).
"Following the exercise by the Essar Group of its put
option, Vodafone has exercised its call option over the
remaining 11 per cent of VEL owned by the Essar Group,
resulting in a total cash payment of USD 5 billion," Vodafone
said in a statement.
Call Option allows an investor the right but not the
obligation to buy a stock, bond, commodity or other instrument
at a specified price within a specific time period.
On the other hand, Put Option is an option contract
giving the owner the right but not the obligation to sell a
specified amount of an underlying security at a specified
price within a specified time.
With this, Essar will exit completely from the joint
venture, which is offering nationwide mobile services in
India. Vodafone has over 130 million subscribers and is the
third largest operator in India.
Vodafone also said that final settlement is
anticipated to be completed by November, 2011.
Sources in the know said that the completion of deal
would be subject to meeting certain conditions which include
Reserve Bank of India's permission as well as valuation of the
deal.
The final shareholding pattern post this deal was not
provided by the company as it was not clear whether
Vodafone's stake would exceed the 74 per cent FDI limit.
Vodafone had entered Indian market in 2007 when it
bought Hutchison's stake in the joint venture for over USD 11
billion and after that it had entered into an agreement with
Essar for a call and put option for its stake.
The two firms were locked in battle over Essar's plan
to list a firm that had part stake in the joint venture to
find out market value of its 33 per cent stake.
The move was opposed by Vodafone saying this may not
give true value of Vodafone's stake. It had approached the
market regulator SEBI and also filed a petition in the Madras
High Court.
