VSNL to buy Teleglobe for $239 mn
The Financial Express — July 26, 2005

Videsh Sanchar Nigam Ltd., the long-distance phone company owned by India's $17 billion Tata Group, agreed to buy Teleglobe International Holdings Ltd. for $239 million in cash and assumed debt.

Videsh Sanchar will pay stockholders of Teleglobe, which sells services to transmit data over the Internet, $4.50 a share,

Videsh Sanchar said today. The offer price is at a 22 per cent premium to Teleglobe's $3.69 share closing on June 22. The acquisition is expected to be completed by March, Hamilton, Bermuda-based Telegobe said in a separate statement.

Mumbai-based Videsh Sanchar, which lost its monopoly as an overseas call operator in April 2002, is trying to boost sales by buying companies such as Teleglobe as long-distance call rates fall and Indian rivals such as Reliance Infocomm Ltd. and Bharti Tele-Ventures Ltd. offer customers more incentives. In November, Videsh Sanchar bought a stake in U.S.-based Tyco International Ltd.'s global undersea cable network to bolster overseas services.

``The acquisitions are helping Indian companies to achieve scale globally,'' said Paras Adenwala, who manages the equivalent of $200 million at ING Investment Management in Mumbai. ``If we look at the price that these companies are paying for overseas acquisitions, it is very attractive.''

The acquisition, which is subject to approvals from Teleglobe shareholders and various governments, will give Videsh Sanchar access to a telecommunications network across 240 countries and equity stakes or capacity in more than 80 undersea and terrestrial cables, the statement said.

Shares

Shares of Videsh Sanchar, which have risen 58 per cent in July, rose 15.65 rupees, or 4.2 per cent, to 388.80 rupees at the 3:30 p.m. close on the Bombay Stock Exchange.

Teleglobe Bermuda Holdings Ltd., an affiliate of Cerberus Capital Management, which owns 66 per cent of Teleglobe's shares outstanding, has agreed to vote in favor of the acquisition, Teleglobe said.

After the acquisition, Teleglobe, which sells services to transmit data over the Internet, will be merged with a Bermuda-based unit of Videsh Sanchar, the statement said.

Videsh Sanchar, which bought Tyco's undersea cable network for $130 million, completed the acquisition earlier this month.

Teleglobe International has more than 1,400 large customers and carries more than 13 billion minutes of voice traffic globally, the statement said.

In June, Videsh Sanchar said it would spend $200 million to start services in South Africa, having bought a stake in a fixed-line operator there in February.

South Africa on Feb. 12 gave Videsh Sanchar a 26 per cent stake in a planned second fixed-line telephone service operator, ending the monopoly of Telkom South Africa Ltd.

The Indian government sold a 25 per cent stake in Videsh Sanchar in February 2002 to the Tata Group for 14.4 billion rupees, bringing its stake down to 26 per cent. The Tata group later bought an additional 20 per cent in Videsh Sanchar from the market.