Bidding War For Hutchison Essar Heats Up, Possibly Leaving Vodafone Out In Cold

Bidding has intensified for Indian mobile leader Hutchison Essar, and it now appears increasingly likely initial front runner Vodafone will be closed out of the deal. Two new groups have entered the fray: Hinduja Group, the Indian conglomerate managed by the four Hinduja brothers and U.S. telecom giant Verizon. The Hinduja Group, which sold a 5.1% stake in Hutchison in June, has stated it wont settle for less than 51% ownership in the group. Verizon is considered a less likely buyer but Business Week is reporting the company is eyeing an entry into the Indian mobile market - expected to expand from 150 million to 450 million customers by 2010. Other bidders include a group led by India's second biggest cell-phone operator Reliance Communications, Malaysian cell-phone operator Maxis together with U.S. private equity player Texas Pacific Group, and the Essar Group, which would like to buy the two-thirds of the company partner Hutchison owns. Australian investment bank Macquarie, put Hutchison Essar’s enterprise value at $13.7 billion, with an equity value of $12.18 billion last month. However, Vodafone had bid as much as $18 billion as interest has intensified causing shareholders in the company to warn it not to overpay for the Indian company. State Street, 1.7% shareholder in Vodafone has gone so far as to state: “Vodafone must be prepared to walk away” if the acquisition criteria it has set are superseded.

• Sources: Timesonline [UK], Business Week, Forbes
• Related commentary: Business Standard: Hutch-Essar Buyout is Too Expensive, Vodafone In Booming Indian Wireless: Tread Carefully, Essar Group Offers Surprise Bid for Hutchinson Essar, Private Equity Trickles into India, Wireless Eyed
• Potentially impacted stocks and ETFs: Vodafone (VOD), Hutchison Telecom Intl. Limited (HTX), Verizon (VZ). Competitors: Telecom Italia S.p.A. (TI), NTT DoCoMo (DCM), Sprint Nextel (S), France Telecom (FTE), Deutsche Telekom (DT). ETFs: Wireless HOLDRS (WMH), iShares S&P Global Telecommunications (IXP)

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