According to the same source, as a first step in this planned transaction, Bharti Infratel will acquire either all or almost the entire 58 percent stake of other partners in Indus Towers, namely Vodafone, Idea Cellular and Providence Equity Partners. Bharti Infratel currently owns a 42 percent stake in Indus Towers. Vodafone is expected to retain a stake of 8-10 percent. Infratel has the right of first refusal on Vodafone and Idea’s stakes in Indus Towers.
“Bharti Infratel is likely to buy 45-50 percent stake for USD 5.5-6.5 billion as a leveraged buyout that will largely be funded out of the reserves and cash flow of Indus Towers”, said one of the sources. Investment banking sources put the enterprise value of privately held Indus at around USD 11 billion, which includes USD 1 billion in debt.
Bharti, Vodafone, KKR, Aditya Birla Group, CPPIB and ADIA declined to comment on the matter.
The sources also said that, once Bharti Infratel consolidates Indus Towers, the KKR-led consortium will increase its interest in the company from the current 10 percent to become the single largest shareholder. Sources said the consortium may end up owning 40-45 percent stake. Management control will be in the hands of the new financial partners. Bharti Airtel currently owns 61.65 percent of Bharti Infratel, while KKR-CPPIB has a 10.33 percent stake after its USD 954 million investment made in March this year. The remaining stake is held by public shareholders. Eventually, Bharti Airtel is likely to exit its residual stake to deleverage its balance sheet According to one of these sources, the discussions started 15 months ago, and gathered momentum in the past few weeks. If all goes well, the deal is expected to be signed by end-October or early November. The source also said Vodafone is negotiating on behalf of the combined 58 percent block in Indus Towers representing itself as well as Idea and Providence.
“The broad deal is almost in place. However, both the sellers — Vodafone (representing the 58% block) and Bharti Airtel — are yet to reach a closure date”, the source said. The deal is expected to close within four to six weeks, the source added.
Separate rounds of meetings between the key stakeholders took place in London, New York and New Delhi to finalise the valuation and the deal structure, according to another official directly involved in the negotiations. The consortium is already in talks with global banks for offshore and onshore financing to fund both legs of the transaction. It is also expected to informally approach various regulators such as the Competition Commission of India, Securities and Exchange Board of India and Telecom Regulatory Authority of India, among others.
