In what may be the largest private equity deal in the country, Singapore governmentâ€™s investment arm Temasek Holdings will acquire 4.99% stake in the countryâ€™s largest private telecom company, Bharti Airtel, as part of separate but possibly back-to-back transactions that will also see Vodafone selling 5.6% in the company.
The net impact of these transactions will be that the shareholding of Bharti Enterprises, the holding company of Indiaâ€™s largest private telco, will rise marginally from its current 45% and the Temasek-Singapore Telecom combineâ€™s holding (Temasek is the largest shareholder in Singtel) will go up to 36%.
While Bharti executives refused to divulge the deal size and when the Temasek deal will take place, at current market price, it is worth a little over Rs 8,198 crore (about $2 billion).
Bharti and Vodafone had earlier this year announced that the Newbury-based telco will sell 5.6% equity in Bharti Airtel for $1.6 billion in two tranches before November 2008.
â€œBharti Enterprises is pleased to announce that one of its group companies has decided to grant an option to acquire an indirect stake in Bharti Airtel Limited to a wholly-owned subsidiary of Temasek Holdings (Private) Limited, Singapore. The option arrangement envisages acquisition of such number of shares which, on exercise, will result in a beneficial stake in Bharti Airtel Limited to the extent of 4.99%,â€ the company said in a statement. Bharti executives refused to divulge the name of the group company of Bharti Enterprises which has granted the option to Temasek.
This will be Temasekâ€™s second investment in a telecom company in India after it bought 9.9% in Tata Teleservices. Temasek Holdings, the largest shareholder (56%) in Singapore Telecom, holds just over 30% stake in Bharti Airtel.
Bharti executives said despite the deal with Temasek, there will not be a dilution in the promotersâ€™ stake in Bharti Airtel. This implies that the parent company Bharti Enterprises will continue to maintain a controlling interest of a little over 45% in Bharti Airtel. This is because Temasek is indirectly picking up large chunk of the 5.6% stake that British telecom major Vodafone is offloading in Bharti Airtel.
â€œVodafone has given us 18 monthsâ€™ time to buy back its 5.6% direct stake in Bharti Airtel. At the same time, Temasek is picking up stake in one of the Bharti group companies, which translates to a 4.99% indirect stake in Bharti Airtel. Temasek is indirectly picking up the stake that Vodafone will offload. Therefore, net-net, there is no change in the overall shareholding â€” Bharti Enterprises continues to maintain a controlling interest of over 45% in Bharti Airtel Limited through its subsidiary Bharti Telecom,â€
Vodafone had picked up 10% stake in Bharti Airtel in 2005 for $1.5 billion. However, following its acquisition of a majority stake in Hutch-Essar for $10.9 billion, Vodafone had entered into a share sale agreement with Bharti to sell back the 5.6% direct stake in Bharti Airtel for $1.6 billion (Vodafone will continue to hold its 4.39% indirect stake in Bharti Airtel). â€œThe shareholding will be transferred in two tranches, the first before March 31, 2008 and the second by November 2008,â€ Vodafone had said in May 2007 in a statement after announcing its annual results for the year ended March 31.