Reliance awaits a ‘Flag’ off

MUMBAI: Reliance's revised offer for Flag Telecom of $211 million as compared to the earlier offer of $207 million in an all-cash deal is still in limbo. The shareholders are yet to vote to flag off the deal.

The shareholders of Flag Telecom will meet soon to vote on the proposed amalgamation. Reliance that initially made an offer of $207 million for Flag, later revised it to $211 million. Reliance has already secured around 50.5 percent beneficial votes of Flag shareholders and the price per share after the amended agreement worked out to be $ 97.41.

The hype and hoopla started when Reliance got the beneficial ownership of an additional 4.8 percent shares of Flag Telecom after it entered into an agreement with a third shareholder, Jackson National Life Insurance Company. Reliance is supposed to pay Jackson shareholders about $125,103.69 in exchange for a vote in its favor at the shareholders meeting. With this agreement, Reliance is now deemed to beneficially own 50.5 percent shares of Flag.

This is the third agreement Reliance has entered into with Flag shareholders. Earlier it had tied-up with two other shareholders that include Harbert Distressed Investment Master Fund Ltd, the largest shareholder of Flag Telecom which owns 37.1 percent of shares and Triage, which owned 8.6 percent of shares. These two agreements guaranteed Reliance to get a beneficial vote of 45.7 percent of Flag's shares. In connection with the voting agreement, Reliance Gateway has agreed to pay Harbert $ one million in cash upon the consummation of the amalgamation. Also as per the agreement signed on December 11, Reliance is offering $171,472 to Triage shareholders in cash on consummation of the deal, in exchange for their favourable vote. This agreement will help Reliance to secure an additional 8.6 percent votes in its favour.

According to the amalgamation agreement between Reliance Gateway Net, a Reliance Infocomm subsidiary and Flag, the deal would stand cancelled if 30 percent or more shareholders vote against the agreement. But since Reliance already owns 50.5 percent shares of Flag with all the three partners ready to vote in favor of them, the deal is all set to go in Reliance' hand.

(CyberMedia News Service)