SPICE COMMUNICATIONS –

IDEA CELLULAR MERGER__________________________

A CASE STUDY

BY PARIJAT SAURAV

V BBA LL.B.SLS, PUNE

IDEA CELLULAR LIMITED (IDEA)INTRODUCTION: A leading GSM mobile services operator.Idea Cellular is a part of the $ 30 billion

Aditya Birla Group, a multinational corporation of India.

Idea is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in India.

Idea operates in around 20 countries. In India, Idea holds Pan-India License.

SPICE COMMUNICATIONS LIMITED (SPICE)Spice was incorporated as Modicom Network

Private Limited on 28 March 1995 as a private limited company.

Spice subsequently became a deemed public company under Section 43(1A) of the Companies Act, 1956 of India with effect from 1 April 1999 and its name was changed to Modicom Network Limited.

Spice assumed its present name via a fresh Certificate of Incorporation dated 3 December 1999.

With the addition of the word ‘Private’ in Spice’s name under Section 43(2A) of the Companies Amendment Act, 2000 of India, Spice’s name was changed to Spice Communications Private Limited with effect from 28 October 2003.

On 28 December 2006, Spice was converted into a public limited company and assumed its present name.

At the time of the announcement of the merger, Spice offered mobile telecommunication services in the Punjab and Karnataka states of India.

As of 30 April 2008, Spice had 4.4 million subscribers representing a 1.7% market share in India.

Spice was listed on the Bombay Stock Exchange Limited on 19 July 2007, and on the National Stock Exchange of India Limited on 16 June 2008.

TELEKOM MALAYSIA INTERNATIONAL (TMI)Listed on Bursa Malaysia, TMI is among the

top ten biggest public listed companies in Malaysia by market capitalization.

It is the first listed pan-Asian pure cellular service provider in the region.

At the time of announcement, TMI, including subsidiaries and associates, had over 44 million mobile subscribers in Asia, putting it among the largest mobile telecommunication providers in the region by turnover.

MERGER Merger is defined as fusion of two or more

existing companies.

One survives and the others lose their corporate existence.

The survivor acquires all the assets as well as liabilities of the merged company or companies

THE DEALThe deal was announced on 25th June 2008 by

a press release by the Aditya Birla Group.

Idea to acquire the Spice Group stake of 40.8% in Spice Communications Limited (‘Spice’) at a price of Rs 77.30 per share at a premium of 40%. The stake is valued at Rs 2,175 crores.

Idea will also make a payment of approximately Rs 544 crores to the Spice Group as non-compete fee.

Idea and TM International (‘TMI’) along with their affiliates and associates (as persons acting in concert), will make an Open Offer for an additional 20% stake in Spice.

The Open Offer will be made at a price of Rs 77.30 per share.

The swap ratio was determined at 49 shares of Idea for every 100 shares of Spice.

GAINS FOR EACH ENTITYThe new entity would form the fourth largest

GSM telco after Bharti, Vodafone and BSNL with a total of 14.43% market share. 

The shares of both the merging entities were values at premium. The shares of Spice were valued at Rs. 77.30 per share (40% premium) whereas the shares of Idea was valued at Rs. 156.96 per share (58% premium).

Spice to become Pan Indian operator.

Idea to operator in two more circles (Punjab and Karnataka) and an addition of 4.4 million subscribers.

TMI to get share in the shareholding pattern of Idea (estimates at 14.99%) which may give TMI more penetration in Indian Telecom Market.

Open offer of 20% to Shareholders of Spice.

SHAREHOLDING PATTERN OF SPICE

40.80%

39.20%

20.00%

BEFORE MERGER

SPICE COMMU-NICATIONS LIM-ITED (40.80%)TMI INDIA LIMITED (39.20%)OTHERS (20.00%)

SHAREHOLDING PATTERN OF SPICE

41.09%

49.00%

8.80% 1.11%

AFTER MERGER

IDEA CELLULAR LIMITED (41.09%)TMI INDIA LIMITED (49.00%)GREEN ACRE AGRO SERVICES P. LTD. (8.80%OTHERS (1.11%)

SHAREHOLDING PATTERN OF IDEA

31.78%

10.76%

57.46%

PRE MERGER

ADITYA BIRLA NUVO LTD. (31.78%)BIRLA TMT HOLDING P. LTD. (10.76%)TMI (0.00%)OTHERS (57.46%)

SHAREHOLDING PATTERN OF IDEA

27.02%

9.15%

14.99%

48.84%

POST MERGER

ADITYA BIRLA NUVO LTD. (27.02%)BIRLA TMT HOLD-ING P. LTD. (9.15%)TMI (14.99%)OTHERS (48.84%)

PROCEDURE IN THE MERGERThe Board of Directors of the Target Company (SPICE)

at its meeting held on June 25, 2008 approved the scheme of amalgamation (merger) with Idea. The same was intimated to the sock exchanges where the shares of the target company (SPICE) were listed.

The deal was announced by a press release by the Aditya Birla Group on the same date.

Application u/S. 391/394 was moved by the parties in the Hon’ble Delhi High Court and the Hon'ble High Court of Gujarat at Ahmedabad

On June 30, 2008, The Acquirer (IDEA) and the PAC made public announcement/open offer to acquirer up to 137,985,050 equity share ("Shares") of the face value of Rs.10 each, representing in aggregate 20% of the paid-up equity share capital of Target Company (Spice Communications Limited) in terms of provisions of the SEBI (SAST) Regulations, 1997 at a price of Rs.77.30 per share (Rupees Seventy seven and thirty paise only).

The existing Shareholders Agreement dated 10th March, 2006 between the existing shareholders was Terminated pursuant to the termination agreement dated 25th June 2008.

On 7th July, 2008, the Acquirer (IDEA) acquired the shares of the target company (SPICE). Pursuant to the acquisition and abiding by the provisions of the Takeover Code, the Acquirer and the target company made the requisite disclosure to the stock exchanges where the shares of the target company were listed.

The Public Offer closed on October 6, 2008 and the shareholders were paid the consideration on October 15, 2008 as per the Regulations of the Takeover Code.

Idea Cellular Limited (Idea) together with its associate namely Green Acres Agro Services Pvt. Ltd., currently holds 49.9% equity in Spice Communications Limited (Spice). The other major shareholder in Spice is TMI India Limited which holds around 49.0% equity. The balance around 1.1% is held by public.

Spice Communications Limited convened and held the Equity Shareholders, Secured Creditors and Unsecured Creditors meeting(s) pursuant to the directions of the Hon'ble High Court of New Delhi on the September 11, 2009. The Equity shareholders, Secured and Unsecured Creditors of the Company duly approved the scheme of amalgamation of Spice Communications Limited with Idea Cellular Limited. The said scheme of amalgamation was approved by the Equity Shareholders of the Company with requisite majority and unanimously by the Secured Creditors and Unsecured Creditors of the Company.

The Hon'ble High Court of Delhi at New Delhi and Hon'ble High Court of Gujarat at Ahmedabad sanctioned the Scheme of Amalgamation of Spice Communications Limited with Idea Cellular Limited u/s 391 to 394 of the Companies Act, 1956 in February 2010.

Pursuant to the sanction of the scheme of amalgamation by the two High Courts, the Board of Directors of Idea have fixed March 12, 2010 as the 'Record Date' for the purpose of drawing up the list of shareholders of Spice to whom Equity Shares in Idea are to be issued and allotted pursuant to the said Scheme. The Court Orders have been filed in the respective offices of the Registrar of Companies and the Scheme became effective on March 01, 2010.

In accordance with the Scheme, the Equity Shareholders of Spice (Transferor Company) as on the Record Date i.e. March 12, 2010, were issued and allotted Equity Shares in the ratio of 49 (Forty Nine) Equity Shares of Rs.10/- each fully paid-up of Idea (Transferee Company) for every 100 (One Hundred) Equity Shares of Rs.10/- each held in Spice. Further, Idea Cellular Limited has submitted to the Stock Exchanges, note on the said Scheme of Amalgamation.

THANK YOU