Hutch to have majority stake in merged entity

Hutchison Whampoa likely to bring in funds at later stage.

Hutchison Whampoa will continue to have a majority stake in the entity to be created after the merger of BPL's mobile business with Hutchison Essar. Prashant Ruia, director, Essar group, told Business Standard Hutchison would continue to retain its majority stake in the merged entity but refused to elaborate on this.

"We have signed a binding agreement to acquire BPL's mobile business. We intend to merge BPL with Hutchison Essar, subject to regulatory approval."

The Hong Kong-based Hutchison Whampoa, which holds 53.4 per cent in Hutchison Essar, is also believed to have agreed to chip in funds in the merged entity at a later stage.

Hutch can inject the money either by subscription of preferential shares of the company or by acquiring a slice of the shareholding of the Essar group or a combination of both.

In case of the subscription of preferential shares, the merged entity will get the funds, while Essar will get the money if it sells a portion of its shareholding.

Ruia, however, did not want to comment on the issue but said the group alone was bringing in the required funds for the acquisition of BPL Communications.

Industry sources said Hutchison could only retain majority control by bringing in more capital. "Hutchison's stake should come down in the expanded equity capital of the merged entity. But it won't happen because Hutchison would bring in fresh capital," said a source.

The source said the Essar group would obviously charge a premium over its acquisition price today in case they sell shares to Hutchison later.

Industry sources said Essar pipped the British telecom major Vodafone to the emerge as the highest bidder of BPL's mobile business in the last leg.

Ruia said Essar chose to bid for BPL Communications because Esaar was also in the process of building its independent identity in the telecom space. The group, he said, had independently bid for seven circles. He said any speculation that Essar went solo for the BPL acquisition because it did not have good relations with Hutch was baseless.

Asked when the merged entity would go public, he said it was too premature to comment on this.