Vodafone is expected to make a renewed bid for Hutchison Essar, India's fourth largest mobile phone operator, as early as next week, resuming the takeover exercise it had initiated towards the end of 2006.
A report in The Observer on Sunday said the bidding war for telecom firm Hutchison Essar will erupt again, with Britain's Vodafone preparing to table a fresh offer that would value the target at up to 19 billion dollars.
Two Indian companies are counter-bidding in one of the most hotly fought takeover battles for years.
Hutchison Whampoa, controlled by Li Ka-shing, the Hong Kong shipping and property magnate, put its 67 per cent stake in Hutchison Essar up for sale in November. Offers are being handled by investment bank Goldman Sachs.
The mobile business is a joint venture with Essar, an Indian conglomerate headed by two brothers, Shashi and Ravi Ruia. They have the right of first refusal in the bidding contest and have tabled 11 billion dollars for the Hutchison stake. But Vodafone will shortly outbid Essar and offer close to 13 billion dollars, putting a price tag of 19 billion dollars on the whole company, the report said.
Vodafone is prevented under Indian takeover laws from owning more than 74 per cent of Hutchison Essar so it needs to find a partner.
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 auction, it said.
The other contender for Hutchison Essar is Reliance Communications, India's second-largest mobile company, which is expected to team up with a private equity firm such as KKR or Texas Pacific, The Observer said.
A city banker told the newspaper: "Reliance is a serious competitor and it is not inconceivable that Sarin will be forced to talk away."
According to the report, investors are anxious that Vodafone should not overpay for the Indian stake. "Bidding silly money will remind people of the extravagant sums Vodafone paid for some assets during the technology boom," said one analyst.
But banks say that Vodafone could make a bid that valued Hutchison Essar at 20 billion dollars without breaching internal guidelines designed to ensure that acquisitions deliver above average rates of return.
