Vodafone Idea will sell its 11.15% stake in Indus Towers for a cash consideration of about Rs 4,000 crore as Bharti Infratel’s board has decided on the merger with Indus Towers. However, Vodafone Plc will stay invested in the merged entity with a likely shareholding of 28.2%. Providence will hold around 3.2% while Bharti Infratel shareholders will hold 68.6% in the merged entity.
The exiting of Vodafone Idea (VIL) at this stage makes sense as it is raising funds from all available options to pay its AGR dues.
In April 2018, Bharti Airtel, Idea Cellular and Vodafone Group had announced an agreement for the merger of Indus Towers and Bharti Infratel. It will have over 163,000 towers across 22 telecom service areas in India. Indus Towers is jointly owned by Bharti Infratel (42%), Vodafone (42%), Idea (11.15%) and Providence (4.85%).
“After deliberations the Board has authorised the chairman to proceed with the scheme and comply with other procedural requirements to complete the merger – including approaching National Companies Law Tribunal (NCLT) to make the scheme effective subject to certain procedural condition precedents,” Bharti Infratel said in a regulatory filing.
To secure the payment obligation of VIL under the master service agreement, VIL and Vodafone Group have entered into certain security arrangements with the company, for the benefit of the merged entity.
This includes a combination of a security deposit by Vodafone Idea, security via pledge of a certain number of shares of the merged company out of those issued to Vodafone Group (as part of the scheme) and a corporate guarantee by Vodafone Group which can get triggered in specific situations and events.
These security arrangements are subject to regulatory nods and any approval of Vodafone Group Plc’s lenders, the filing said.
“The security arrangement will provide the merged company a payment cover of over one year for the operational payments due from VIL,” it added.
The merger will become effective on the date on which certified copy of the order of NCLT is filed with Registrar of Companies.
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