It is expected that Vodafone will be issued with 760 million new shares in the Combined Company at closing in exchange for its 42% shareholding in Indus Towers on the basis that (a) Providence Equity Partners (“Providence”) has elected to receive shares in the Combined Company in respect of its 4.85% shareholding in Indus Towers, and (b) Vodafone Idea has elected to sell its full 11.15% shareholding in Indus Towers for cash. The shares issued to Vodafone would be equivalent to 28.2% in the Combined Company. Bharti Airtel's shareholding in Bharti Infratel would be diluted from 53.5% to 36.7%. Bharti Airtel and Vodafone will jointly control the Combined Company.
At the current Bharti Infratel market valuation, Vodafone's stake in the Combined Company would have a value of approximately INR 151 billion (€1.7 billion) and Vodafone Idea would receive approximately INR 40 billion (€464 million) in cash upon completion.
The final number of shares issued to Vodafone and Providence, as well as the cash paid to Vodafone Idea, will be based on agreed closing adjustments, including but not limited to movements in net debt and working capital for Bharti Infratel and Indus Towers up to closing.
Security Package
The parties have agreed a security package (the “Security Package”) for the benefit of the Combined Company. The Security Package can be invoked in the event Vodafone Idea is unable to satisfy certain payment obligations under its Master Services Agreement with the Combined Company (the “MSA”).
The Security Package is supported entirely by consideration from the transaction. The Security Package includes the following:
· a prepayment in cash of INR 24 billion (€276 million) to be made at completion of the transaction by Vodafone Idea (the “Prepayment”) to the Combined Company in respect of present and future obligations under the MSA;
· a primary pledge over shares owned by Vodafone in the Combined Company with a value of INR 40 billion (€464 million); and
· a secondary pledge over shares owned by Vodafone in the Combined Company (ranking behind Vodafone's existing lenders for the €1.3 billion loan utilised to fund Vodafone's contribution to the Vodafone Idea rights issue in 2019) with a maximum liability cap of INR 42.5 billion (€489 million).
The implementation of the Security Package is subject to consent from Vodafone's existing lenders in respect of the loan outlined above, regulatory approvals and on an extraordinary dividend of INR 48 billion (€552 million) being declared by the Combined Company within three months after completion.
The number of shares under the primary pledge will be determined at completion, based on the prevailing Bharti Infratel share price. The Security Package will reduce in value over time with payments made by Vodafone Idea under the MSA.
Completion
The transaction is conditional on consent from Vodafone's existing lenders and a grant of an extension by the National Company Law Tribunal (“NCLT”) in respect of the statutory filing period for the merger scheme to make the merger scheme effective. Lender consent is expected within 21 days, after which the parties will work to complete the transaction expeditiously.