Ravi Ruia to chair Hutch board
British telecom giant Vodafone has reached an amicable settlement on almost all the broad issues with the Ruias, the junior partner in Hutch-Essar. Vodafone would nominate Essar group Vice-Chairman Ravi Ruia as non-executive chairman of the telecom company but would retain management control, sources close to the deal said.
Arun Sarin will be vice-chairman, and Asim Ghosh managing director and CEO. An announcement to this effect is expected in the next two days.
Besides nominating Ravi Ruia as chairman of Hutch-Essar, Vodafone had agreed to a four-year put option for the Essar group, the sources said. It, however, did not agree on a higher valuation and the put option was based on an enterprise value of $18.8 billion, the sources added.
"Vodafone argued that the acquisition of Hutchison Telecommunications International’s stakes also involved a control premium and, therefore, Essar’s equity stake of 33 per cent could not command a higher premium," they said. Essar also has the option to enter the capital market to divest its holding, in part or whole, "if Essar feels that its stake can fetch a better valuation at any point of time in the next four years. Vodafone as the majority shareholder has given a consent to this," the sources said.
The put option will provide Essar the ability to raise an amount equal to its stock value as debt. The reconstituted Hutch-Essar board will have nine directors, three of them Essar representatives. Analjit Singh will be an independent director. The existing board has 11 members, four — Ravi Ruia, Anshuman Ruia, Prashant Ruia and Vikas Saraf — are representatives of the Essar group.
Vodafone CEO Arun Sarin and Ravi Ruia are in Delhi to tie up the loose ends of the deal. The sources said Essar executives had met officials in the Foreign Investment Promotion Board (FIPB) to offer their consent to the deal. The Vodafone representative in India refused to comment on the issue.
The name of the company will be changed to Vodafone Essar under the agreement. However, Vodafone will re-brand services to Vodafone Essar over the next two years.