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CCI approves Vodafone India’s merger deal with Idea Cellular

The Competition Commission of India (CCI) has approved the proposed merger of Vodafone India with Aditya Birla owned Idea Cellular, according to the latter’s filings with the stock exchanges. Both companies had signed a definitive deal in March this year. Both Vodafone and Idea will have equal control over the merger entity. However, Vodafone will remain as the largest shareholder in the combined entity. Idea Cellular will additionally sell a 9.5% stake to Aditya Birla.

The transaction is subject to regulatory approvals and is expected to close during 2018, Vodafone said during its recent financial results. The deal was signed after Reliance Jio’s launch in September last year. Jio’s freebies have hurt telco’s earnings, forcing smaller telcos to look for an exit. Other telcos are also consolidating to take on Jio: Telenor is now merging with Airtel while Videocon has decided to partially exit the telecom industry and re-launch via an MVNO license.

Currently, promoters own 42.39% in Idea Cellular, according to BSE filings. The rest 57.61% stake in held by public shareholders. Aditya Birla Group currently owns 31% (majority stake) of Idea Cellular, while the rest of the promoters including Pilani Investments, Hindalco Industries, and Grasim Industries own rest of the minority stake in Idea Cellular. Below is the proposed merger scheme between both companies:

  • Vodafone will own a 50% controlling stake in the combined entity, while Aditya Birla will own a 21% stake in the combined entity.
  • Post completion of the merger, Vodafone will transfer 4.9% stake in the merged entity to Aditya Birla for Rs 3,874 crore.
  •  After the transfer of stake, Aditya Birla’s stake in the merged entity will be increased to 26% while Vodafone’s stake will reduce to 45.1%.
  • The remaining 28.9% stake will be open other shareholders.
  • Additionally, Aditya Birla will have the rights to acquire more stake from Vodafone at Rs 130 per share, for a period of 4 years.

“Voda-Idea merger is not an exit strategy”: Vodafone CEO

When asked whether the Idea merger talks is an exit strategy, Vodafone Group’s CEO Vittorio Colao said during an analyst call that deal targets to build a stronger asset base using spectrum holdings and management teams from both companies and that it’s “not an exit” move. Vodafone was valued at $12.4 billion, while Idea’s Valuations stood at $10.8 billion when the deal was signed in March. The combined entities will together hold a net present value (NPV) of Rs 670 billion (~$10 billion) after integration costs and spectrum liberalization payments.

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