Indus-Infratel to go ahead with merger; Voda-Idea to sell 11.15% Indus stake for Rs 4,000 crore

Kolkata: Vodafone Idea Ltd (VIL) has decided to cash out by selling its 11.15 per cent stake in Indus Towers for roughly Rs 4,000 crore even as Bharti Infratel decided to go ahead with the closure of its mega towers merger with Indus.Bharti Infratel said the likely ownership structure of the merged towers entity is based on “cash consideration chosen by VIL for its 11.15 per cent shareholding in Indus -- based on an agreed formula – and on today’s calculation, the cash consideration comes to approximately Rs 4,000 crore”.“The board of directors in its meeting on August 31 took note of the status of scheme of arrangement between Indus Towers and Bharti Infratel and related agreements…after deliberations, the board has decided to authorise the chairman to proceed with the scheme and to comply with other procedural requirements for completion of the merger, including approaching the National Company Law Tribunal (NCLT) to make the scheme effective subject to certain procedural condition precedents,” Bharti Infratel said in a pre-market hours exchange filing on Tuesday.Further, the tower arm of Bharti Airtel added that to secure the payment obligation of VIL under the master service agreements (MSAs), “VIL and UK’s Vodafone Group Plc have entered into certain security arrangements with the company for the benefit of the merged company”.This, it said, “includes a combination of a security deposit by VIL, security via pledge of a certain number of shares of the merged company out of those issued to Vodafone Plc (as part of the Scheme) and a corporate guarantee by Vodafone Plc, which can get triggered in certain situations and events”.These security arrangements, Bharti Infratel added, remain “subject to all applicable regulatory approvals and any approval of Vodafone Plc’s lenders”. The security arrangement will provide the merged tower company a payment cover of over one year for the operational payments due from VIL.Company officials told ET that the earlier merger ratio (1,565 shares of Bharti Infratel for every 1 Indus share) has changed to 1519 shares of Bharti Infratel for every 1 Indus share). Basis this, Vodafone Plc and Bharti Airtel will own 28.2 per cent and roughly 36.7 per cent in the merged towers entity respectively. Providence Equity Partners, which decided not to exit, will hold 3.2 per cent in the combined entity. The public holding will be 31.9 per cent.VIL’s decision to cash out of Indus came just a few hours before the Supreme Court is slated to give the final verdict in the adjusted gross revenue (AGR) case on Tuesday. The nation’s top court had reserved its order on the period over which such AGR payment could be made, and under what conditions, having underlined that no reassessment of the telecom department’s AGR demand would be allowed. Telcos have sought 15 years to clear their AGR dues, but the SC has said they need to make some upfront payments to avail of a deferred payment mechanism. Bharti Infratel added that the merger scheme shall become effective on the date on which certified copy of the order of NCLT is filed with the Registrar of Companies. The effective date, it added, would be communicated to the stock exchanges for further public dissemination as and when the scheme becomes effective.“While the parties have agreed to proceed to take appropriate steps to progress the approvals for the merger, the completion of the transaction shall be subject to receipt of all such approvals,” Bharti Infratel said in its exchange filing.

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