Vodafone to offer $13 bn to Hutch

British telecom major Vodafone is expected to launch next week a $13-billion bid for Hutchison Whampoa's 67 per cent stake in Hutchison Essar. This will value Hutchison Essar at $19 billion.

Sources close to the development said Vodafone's fresh offer, which would raise the pitch of the bidding war for Hutchison Essar, followed the Essar group's proposal to acquire Hutchison Whampoa's stake for $11 billion, valuing the company at $16.5 billion.

Vodafone's earlier bid, made informally, had valued Hutchison Essar, the country's fourth largest telecom company, at $17 billion.

Besides the Essar group, the Anil Ambani-controlled Reliance Communications is in the fray, although it is yet to put a bid on the table. Investment bankers said Vodafone could eventually up its bid further.

Hong Kong-based shipping and property magnate Li Ka-shing controlled Hutchison Whampoa had put up its 67 per cent stake in Hutchison Essar for sale in November. Offers are being handled by investment bank Goldman Sachs.

The Essar group, the joint venture partner in Hutchison Essar, enjoys some bargaining power as it has the first right of refusal in case Hutchison wants to sell its stake to any Indian company. However, Hutchison can sell its stake to Vodafone without inviting the Essar group to match the foreign company's price.

Vodafone needs to find a partner to run Hutchison Essar as Indian law does not allow it to hold more than 74 per cent in the company. One option is for Vodafone boss Arun Sarin to persuade the Ruia brothers to support the UK company's bid by dropping out of the race.

Vodafone investors are concerned that it might overpay for acquisition of asset in India, one of the fastest growing telecom markets in the world.

However, Standard Life, Vodafone's most critical shareholder, has supported its move, in the wake of its falling revenue in developed markets.