The board of Idea Cellular has approved the planned merger with Vodafone India and its subsidiary Vodafone Mobile Services, in a deal that is set to create India’s largest telecom company. Vodafone will own a 45.1 per cent stake in the the merged entity following the transfer of about 4.9 per cent of shares to Idea’s promoters for ₹38.74 billion ($592.15 million) in cash, Idea said in a statement.
Idea Cellular promoters will have a 26 per cent stake in the company and the rest will be held by public. Idea will have the sole right to appoint the chairman; both Idea and Vodafone will have the right to appoint three directors each. The deal excludes Vodafone’s 42 per cent stake in Indus Towers Ltd. Overtime, Idea’s promoters will have the right to buy more shares in the company with the aim to have an equal stake as that of Vodafone.
Idea and Vodafone have also signed a three-year “standstill” agreement, which doesn’t allow the sale or purchase of shares to any third party during the period. According to the standstill agreement signed by both companies, the merged company is valued at 946 billion rupees ($14.1 billion). That is equivalent to Rs 130 per share of the merged company, representing a premium of 80 per cent on the 30-day average price of Ideas’ shares as of Jan 27, just before the deal was first announced by Vodafone.
In January, Vodafone confirmed their respective boards were in discussions for an all-share merger following media reports. Idea and Vodafone plan to continue their expansion into wireless broadband services across India with technologies including 4G, 4G+ and 5G. They also plan to boost digital content and introduce services such as Internet of Things, and mobile money offerings, the companies said.