Kumar Birla meets Sebi chief on Idea-Vodafone merger MERGER MATRIX
Aditya Birla Group Chairman Kumar Mangalam Birla met Ajay Tyagi, chairman of the Securities and Exchange Board of India (Sebi), last week to discuss regulatory aspects of the proposed merger of his entity’s telecom arm, Idea Cellular, and Vodafone India, said sources.
Concerns had been raised in several quarters over the proposed structure and arrangement of the merger. An government official said Sebi had got complaints from various stakeholders on the proposal.
Sebi itself is examining if the deal meets the takeover code regulations and the price discovery. In May, it had raised some queries after Idea approached it for the merger approval. Business Standard had reported the concerns raised by Sebi on May 18.
An e-mail sent to Aditya Birla Group companies remained unanswered.
In March, Idea Cellular and Vodafone India announced the merger proposal. In the first stage, domestically-listed Idea Cellular and unlisted Vodafone India would merge their operations at a share swap ratio of 1:1. Then, Birla’s holding companies would buy a 4.9 per cent stake from Vodafone at ~110 a Chairman, Aditya Birla Group | | | | | In March, Idea & Vodafone India announced merger plan In 1st stage, Idea & Vodafone India will merge operations at a share swap ratio of 1:1 Birla’s holding firms will buy 4.9% from Vodafone at ~110 a share, investing ~3,900 crore This will raise Idea's stake to 26% and bring down Vodafone Plc's stake to 45.1% Birlas will have the right to acquire another 9.5-9.88% stake from Vodafone in the next 4 years share, investing close to ~3,900 crore.
This would increase Idea’s stake to 26 per cent and bring down parent Vodafone Plc’s stake to 45.1 per cent. The Birlas would have the right to acquire another 9.5-9.88 per cent stake from Vodafone in the next four years, so that both partners eventually hold equal stake in the company (about 35.6 per cent each).
Sebi had asked the Birla group for the promoters’ share transaction agreement. It had also questioned why this arrangement was made part of the merger scheme.
Sebi’s Issue of Capital and Disclosure Requirements (ICDR) regulation says a company would have to disclose all the materially important facts and ensure all disclosures are true, fair and adequate.
Sources said the markets regulator was looking into the share purchases made by Pilani Investment, an arm of Aditya Birla Group, in Idea Cellular just before the announcement of the proposed merger.
Aditya Birla Group has replied to all the queries raised by the regulator and Sebi is examining these, said a source. Legal experts say the merger process could take longer than expected, as the nature of Sebi’s queries are complex and could take time to be addressed.
“The proposed structure is complex and might need to be tweaked. It can be made more investorfriendly,” said J N Gupta, managing partner at corporate governance advisor SES.