Hutchison, Essar differ on refusal rights

Essar group, which controls 33 percent of the venture, is reported to want to buy all or part of the stake.

Hutchison Telecommunications International Ltd. and India's Essar group differ on their interpretation of a first right of refusal clause in their Indian joint venture, Indian newspapers said on Wednesday.

Hutchison Telecommunications has been approached by various parties to sell some or all of its 67 percent stake in Hutchison Essar, India's fourth-largest mobile service provider.

Britain's Vodafone Group Plc and Reliance Communications, India's second-largest mobile operator, have expressed interested in Hutchison Essar, and media reports say Vodafone has submitted a bid which puts a value of at least $17 billion on the company.

But the Essar group, which controls 33 percent of the venture, is reported to want to buy all or part of the stake.

"The first right of refusal is with us. I don't want to say anything more," a spokesman for the Essar group told Reuters.

The Business Standard newspaper said on Wednesday the differences over the shareholder agreement could prolong a decision on the sale of the mobile operator.

Sources close to Hutchison said "crucial conditions" associated with a first right of refusal for the Essar group in the event the Hong Kong company wanted to sell its stake had not been met, the paper reported.

It said by this interpretation, Hutchison could sell its stake to Vodafone or a buyout equity fund without going to the Essar group's controlling family, the Ruias.

But sources on the Ruia side said the first right of refusal would come into play if Hutchison's stake fell below 40 percent and the buyers were a foreign telecommunication firm or a buyout fund, the paper said.

In the event Hutchison wanted to sell any stake to an Indian company, then Essar believed it had first right of refusal on that, newspapers said.

The Financial Times said this week Essar had pledges for financing a bid.

The Economic Times said Malaysia's Maxis Communications was not interested in a bidding war and had dropped out of the race, while a consortium of Egypt's Orascom Telecom and Qatar Telecommunications Co., which had been interested, had now decided against bidding.

Reliance Communications chairman Anil Ambani said last week his firm had commitments from global bankers for a potential bid but did not indicate how much he might offer, just saying it would remain within a "conservative limit".

Goldman Sachs estimates an offer of $18 billion would imply an enterprise value some 27 times estimated 2006 earnings before interest, tax, depreciation and amortisation.

source and copyright : Reuters