NEW DELHI: The Essar Group said its 33% stake in Vodafone Essar, India's second largest telecoms company by customers, was worth more than the $5 billion that Vodafone was offering it.
Essar's stance counters Vodafone Group chief executive Vittorio Calao's arguments earlier this week that its JV partner agreed to sell its 33% stake for $5 billion as it could not get a higher valuation.
The latest spat between the two partners follows the decision of the Madras High Court on Thursday to reject Vodafone's plea opposing the merger of the two companies. Vodafone had opposed the merger between India Securities and Essar Telecommunications, which owns about 11% in Vodafone Essar, and said that this could be misinterpreted as afair market value for their unlisted mobile phone company here.
"We have always believed that the fair market value of Vodafone Essar is higher than the underwritten value, and this is especially so in light of the recent stellar performance of the company," the Essar spokesperson said.
The Essar spokesperson also said the verdict vindicated its stand that Vodafone did not have any locus standi in relation to this merger as it was neither a shareholder nor a creditor of the relevant companies.
The objections filed by Vodafone were intended to delay the merger, and serve their own commercial interests to prevent the discovery of a fair market value of Vodafone Essar through a market mechanism, the Essar spokesperson added.
On Tuesday, the chief executive of Vodafone, the world s largest mobile phone company, told ET that it would not pay more than $5 billion for buying out the Ruias 33% stake in their JV here. "Essar had two options - sell their entire stake for $5 billion as per the earlier agreement, or appoint an independent entity to arrive at a fair market valuation.
That they choose the underwritten floor price proves they could not get a higher valuation (than $5 billion)," Colao had said. He also added that Ruias seeking a higher price was a "psychological" tactic that all entrepreneurs employ during negotiations.
"They (Essar Group) are entrepreneurs who want to defend their investments to the last value. Nobody will believe they did not exercise what is best for them." Executives close to Essar said that despite the Madras high court order, which allowed merger and indirect listing of Vodafone Essar, it was too late for public shareholders of ISL to benefit from this decision as Vodafone had already announced it was buying out the Essar Group's one-third stake in its Indian JV.
The agreement between Vodafone and Essar was formed in two parts – one a put or sell option for 22% held by the Essar Group overseas and the other a call or buy option for Vodafone to buy 11% stake the Essar group held in India.
Joji Thomas Philip & Sanjay Vijaykumar
Source: timesofindia.indiatimes.com
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