The Hindu : Business : VSNL to acquire Teleglobe

Online edition of India's National Newspaper
Tuesday, Jul 26, 2005

Business

Business

VSNL to acquire Teleglobe

Staff Correspondent

$239 m deal to be carried out through amalgamation with a Bermuda subsidiary

ACQUISITION SPREE: Srinivasa Addepalli (left), Group Chairman's Office, Tata Industries, and N. Srinath, Director of Board, VSNL, at a press conference in Mumbai on Monday. — Photo: Shashi Ashiwal

MUMBAI: The Tata group company Videsh Sanchar Nigam Ltd. (VSNL) has announced the acquisition of the Nasdaq listed Teleglobe International Holdings Ltd., a leading provider of wholesale voice, data, Internet Protocol (IP) and mobile signalling services for an enterprise value of $239 million.

The acquisition would be carried out through the amalgamation of Teleglobe with a VSNL subsidiary in Bermuda — VSNL Telecom (Bermuda) Ltd.

According to Rajiv Dhar, Chief Financial Officer, VSNL, the funding for the acquisition would come from a mix of internal accruals and borrowings for refinance of the company's existing debt.

Of the $ 239 million enterprise value, the equity offer of $4.5 per share to the shareholders of Teleglobe is at a premium of 22 per cent over the previous closing share price and would amount to $178 million. The main shareholder of Teleglobe is Cerberus, a private equity firm, which holds 66 per cent equity post-restructuring, which commenced in 2003. The remaining $61 million is the net debt of the company. The transaction would need government approvals from various countries like the U.S. and Canada and would be closed in 6-8 months. Once merged with VSNL, Teleglobe would automatically be de-listed from Nasdaq.

Headquartered in Hamilton, Bermuda with a large operating centre in Montreal, Canada, Teleglobe was Canada's incumbent International Long Distance (ILD) carrier and has more than 1,400 wholesale customers and carries over 13 billion minutes of voice traffic globally.

For the year ended December 2004, Teleglobe reported an operating profit of $19 million and a net loss of $38 million. VSNL would absorb Teleglobe's 800-strong workforce.

Addressing the media, Srinivas Addepalli, Group Chairman's office, Tata Industries, said, the strategic imperatives of this move would help VSNL achieve global scale in its wholesale voice business, enhance the TGN network utilisation and product portfolio and expand the business portfolio to related, high margin products.

Earlier this month, VSNL had announced the completion of the TGN acquisition from Tyco Global, which consists of an undersea cable network spanning 60,000 km and the continents of North America, Europe and Asia.

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