Providence exits Idea at discount ahead of Vodafone merger; sells 12 crore shares at Rs 110.3-110.45/share

By: | Published: February 28, 2017 9:49 AM

The US-based private equity firm Providence Equity Partners on Tuesday sold its entire 3.3% equity stake in Idea Cellular in a block deal for about Rs 1,325 crore, ahead of the telecom service provider’s impending merger with rival Vodafone India.

The stake sale, which marks Providence’s complete exit from Idea Cellular, was at a discount of 3.6-3.8% to Monday’s closing price, and dragged the telco’s shares sharply down.

The US-based private equity firm Providence Equity Partners on Tuesday sold its entire 3.3% equity stake in Idea Cellular in a block deal for about Rs 1,325 crore, ahead of the telecom service provider’s impending merger with rival Vodafone India.

The stake sale, which marks Providence’s complete exit from Idea Cellular, was at a discount of 3.6-3.8% to Monday’s closing price, and dragged the telco’s shares sharply down. Providence sold 12 crore shares of Idea at Rs 110.30-110.45 per share, against Monday’s closing of Rs 114.6

Idea Cellular shares were trading at Rs 111, down 3.1%, recovering from the low of Rs 107.1 (down 6.5%) after the deal.

Providence Equity Partners had bought 15% equity stake in Idea back in 2006 for Rs 1,800 crore. It has, since then, sold the stake in parts, booking profit in phases. It last sold a 3.3% stake in June 2016 for Rs 1,375 crore.

Idea’s shares have gained over 60% since January on the news of its merger with Vodafone India.

Earlier this month, India’s second-largest telecommunication services provider Vodafone confirmed it is in talks for an all-share merger with the third-largest operator Idea Cellular, in the first consolidation move in the Indian telecom industry reeling under the pressure of intense competition from Reliance Jio’s free service offers. The proposed merger could give both the companies the required scale to take on the heightened competition.

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Vodafone is reported to have already appointed professional services firms Deloitte and EY to carry out due diligence for the proposed merger. Both the companies have set up the teams for due diligence and expect to complete it soon. The due diligence teams would identify potential areas of value erosion from the merger and would also look for any tax liabilities arising out of combining the two firms.

A possible Vodafone-Idea combine, with a total subscriber base of 39 crore, will surpass Bharti Airtel as the largest telecommunication company, and will be far ahead of Reliance Jio’s 10 crore. Further, the combined entity would have 43% of the revenue market share and 40% of the active subscriber base, research firm CLSA said. The two operators complement each other, with Vodafone having strong presence in urban areas and Idea being an established player in the hinterland. The new capital that Vodafone brings in may be used to pare the substantial debt that Idea has on its books.

 

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