Bharti Infratel and Indus Towers to merge

Bharti Infratel and Indus Towers by way of merger will create a pan-India tower company, with over 163,000 towers operating pan-India.

Indus Towers is currently jointly owned by Bharti Infratel (42%), Vodafone (42%), Idea Group (11.15%) and Providence (4.85%).

The combined company will be the largest tower company in the world outside China which will fully own the respective businesses of Bharti Infratel and Indus Towers, will change its name to Indus Towers and will continue to be listed on the Indian stock exchanges.

The combined company will continue to offer high quality passive infrastructure services to all telecom operators on a non-discriminatory basis, thus helping to support the delivery of the Government of India’s vision of ‘Digital India’.

The merger ratio (1,565 shares of Bharti Infratel for every 1 Indus Towers share, the “Merger Ratio”) is within the range recommended by the independent valuer. The transaction values Indus Towers at an enterprise value of Rs. 71,500 crore ($10.8 billion).

Idea Group has the option to either: sell its 11.15% shareholding in Indus Towers for cash based on a valuation formula linked to the VWAP for Bharti Infratel’s shares during the 60 trading days prior to completion of the merger, which, if calculated at the time of this announcement, would equate to a cash consideration of Rs. 6,500 crore ($1.0 billion) or alternatively, receive new shares in the combined company based on the Merger Ratio.

All the proceeds from the sale of the 11.15% stake will be for the benefit of the entity resulting from the merger of Vodafone India and Idea Group.

Providence has the option to elect to receive cash or shares for 3.35% of its 4.85% shareholding in Indus Towers, with the balance exchanged for shares.

Vodafone will be issued 783.1 million new shares in the combined company, in exchange for its 42% shareholding in Indus Towers. The transaction values Vodafone’s shareholding at Rs. 28,400 crore.

Pro forma for the transaction, the combined company’s equity value would be Rs. 96,500 crore.

The final number of shares issued to Vodafone and the cash paid or shares issued to Idea Group and Providence, will be subject to closing adjustments, including but not limited to movements in net debt and working capital for Bharti Infratel and Indus Towers.

Bharti Airtel and Vodafone will jointly control the combined company, in accordance with the terms of a new shareholders’ agreement.

The transaction is conditional on regulatory and other approvals, including from CCI, SEBI, NCLT, DoT (FDI approval), and is expected to close before the end of the financial year ending 31 March 2019.