Idea bid to buy controlling stake in Spice hits pricing hurdle

Investment banking sources said that B K Modi had asked for Rs 70 a share for his 40.8 per cent stake in Spice, valuing the company at Rs 4,829.47 crore, but Idea is reluctant to pay that much.

"Any price valuing Spice Communications beyond Rs 4,200 crore would be expensive for Idea Cellular," said an analyst with a domestic brokerage requesting anonymity.

Sources familiar with the developments said an eight-member team from Telekom Malaysia, which holds 39.2 per cent in Spice, met US-based billionaire B K Modi and executives of Idea Cellular in Mumbai today. But the meeting failed to arrive at a definitive conclusion over pricing differences.

Idea Cellular had planned to buy B K Modi's 40.8 per cent stake in Spice and make an open offer to acquire the rest for a controlling stake.

Investment banking sources said Idea also planned to offer Telekom Malaysia a stake in its telecom business through a share swap to get the controlling stake in Spice Communications.

The Spice Communications stock closed at Rs 51.95 a share on the Bombay Stock Exchange, down 2.9 per cent from the previous closing.

Sources said the parties were expecting to arrive at a definitive agreement soon.

When contacted, B K Modi and Idea Cellular Managing Director Sanjeev Aga declined to comment on the negotiations.

The sources said Spice was also exploring two other options if the differences couldn't be sorted out. One was to permit Telekom Malaysia to raise its stake in Spice Communications to 74 per cent. Even though Idea Cellular will have no role to play in this deal, the Modi family would sell around 14 per cent and retain 26 per cent.

The other option before Spice Communications was to acquire Telekom Malaysia's 39.2 per cent stake in the joint venture company.