Vodafone calls on Slaughter and May for US$23bn Idea merger

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Slaughter and May and a trio of law firms in India have dialled in on Vodafone India’s proposed merger with Idea – a deal which would create the country’s largest communications business by revenue.

Slaughter and May and S&R Associates are the legal advisors to Vodafone and Vodafone India, while Vaish Associates Advocates and Bharucha & Partners are acting for Idea.

Expected to close in 2018, subject to regulatory approvals and customary closing conditions, including Idea shareholder approval, the deal implies an enterprise value of US$12.4bn for Vodafone India, excluding its stake in Indus Towers, and US$10.8bn for Idea.

Vodafone will own 45.1% of the combined company after transferring a 4.9% stake to the Aditya Birla Group for US$579m in cash at closing. Aditya Birla will then own 26% of the company, and the right to acquire more shares from Vodafone. The duo’s stake in the company will equalise within five years.

The deal would create India’s largest communications business by revenue, with a revenue market share of 41%. The company will have 35% in customer market share with nearly 400m customers.

The combined company is projected to have cost and capital expenditure synergies of US$10bn, with estimated run-rate savings of US$2.1bn yearly four years after completion. It also slashes Vodafone’s net debt by approximately US$8.2bn. The merger is expected to be cash flow accretive from the first full year after closing. The transaction has a breakup fee of US$500mn.

In the 12 months to 31 December, Vodafone India reported EBITDA of US$1.94bn on US$6.67bn in revenues. Idea reported EBITDA of US$1.7bn on US$5.52bn in revenues.

Morgan Stanley and Robey Warshaw are Vodafone and Vodafone India’s lead financial advisors. Other financial advisors are Bank of America Merrill Lynch, Kotak Investment Bank, Rothschild, and UBS.


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