Samena Capital-led PE consortium close to buying majority stake in Reliance Globalcom

Anil Ambani's Reliance Communications Ltd (RCOM) is in advance stage of negotiations to sell majority stake in its global communications services business unit Reliance Globalcom Ltd to Samena Capital-led PE consortium. The firm was earlier in talks with Bahrain Telecom (Batelco) for a deal but the discussions have been called off, the firm disclosed to the stock exchanges on Monday.

It said: “Samena Capital, in a proposed consortium with certain other global PE funds, is at an advanced stage of the process of due diligence and completion of definitive documents in relation to the acquisition of Reliance Globalcom Ltd., our global communications services business unit.”

The intended time line for completion is end of May 2013, it added.

In the filing, RCOM said, at this point, there can be no certainty that this will lead to a transaction.

It did not name the other members of the PE consortium but separate media reports have said it includes Providence and Carlyle. The consortium may buy up to 80 per cent in Reliance Globalcom, which also owns the group's undersea cable business, for around $1-1.2 billion as per various media reports over the weekend.

The stake sale is a part of the restructuring exercise by debt laden telecom firm RCOM to deleverage its balance sheet.

RCOM scrip rose to a 52-week high hitting the intra-day circuit limit before declining marginally and was quoting at Rs 98.05 a share, up 13.88 per cent at 3 PM in a strong Mumbai market on Monday.

Reliance Globalcom owns one of the largest private cable network in the world with over 2,77,000 km of fibre optic cabling including 65,000 km of sub-sea fiber. Through strategic relationships with over 700 network service providers across the world, Reliance Globalcom provides connectivity to 163 countries and territories.

Bermuda incorporated Reliance Globalcom had revenues of $232.5 million with net profit of $90.8 million during FY12.

RCOM was earlier evaluating potential initial public offering and listing in Singapore for Reliance Globalcom, through a business trust in Singapore. This didn’t materialise.

Samena Capital, which is an alternative assets manager focused on South Asia and MENA market, has so far invested small sums in around a dozen firms in India including Jubilant Industries Ltd, Dynamatic Technologies Ltd, Voltamp Transformers Ltd among others. This could be by far its biggest bet in India.

As per its website, Samena has seven funds of which two are special situation fund and two are angel funds, spreading its bets across investment stages. In the open ended funds it has an Asian bond fund and a credit opportunities fund where SEBI approved FII Reyl Asset Management is a co-advisor besides Samena India Credit Fund which is expected to be launched in Q2 of 2013.

If the deal value indeed nears the $1.2 billion mark it would become the second largest PE deal in India ever, behind Temasek’s $2 billion deal to buy a minority stake in Bharti Airtel over five years ago at the peak of bull market in India.

Providence, which focuses on telecom, media and technology investments globally, counts investments in Idea Cellular, Aditya Birla Telecom, UFO Moviez and Hathway Cable in India. Its two telecom sector investments were both in the $400 million plus size, even as it’s recent bets in India have been smaller in ticket value.

Carlyle, on the other hand, strikes both small and mid-sized growth capital deals in India besides deals from its regional buyout fund. Although the quantum of contribution by Carlyle in the overall deal with Reliance Globalcom is not public yet, it may well be second only to the PE firm’s biggest bet in India when it put in $650 million in HDFC in 2007.

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