Maverick businessman B K Modi, who sold his telecom services firm to Idea Cellular in 2008 and then unsuccessfully tried to acquire beleaguered tech firm Satyam last year, is consolidating the group’s remaining telecom business. The group is merging privately held Spice Televentures with public listed firm Spice Mobiles to form a new entity Spice Mobility.
Spice Mobiles-- a BCCL-backed firm through its private treaties division that held 2.53% stake as of December end-- is the mobile handset company of the group while Spice Televentures is the holding company for the group's telecom businesses and its subsidiaries including Spice Digital, the mobile value-added service business through which it offers internet solutions to nearly all operators of the country. Another subsidiary of the firm is Spice Retail, which sells mobile phones and accessories under the HotSpot brand.
Spice Mobiles was valued at Rs 109/share by BSR & Co., while it put the value of Spice Televentures at Rs 862 a share. The company obtained a Fairness Report from Karvy Investor Services. Spice Mobiles scrip was up 5% in early morning trade and was trading at Rs 35.85 a share.
As per the deal, the swap ratio fixed for the merger is 7.9 equity shares of Spice Mobile for each share owned in Spice Televentures. After the merger, promoters will have more than 85% in the new company as against 63% stake in Spice Mobiles as of December end.
The group is already believed to be considering an equity dilution that will bring down the promoters’ holding. This could take the form of a qualified institutional placement or getting in a "strategic investor" for new technology or product, said BK Modi as per this report.
The two companies together have revenues of around Rs 2,000 crore (Spice Mobiles had revenues of Rs 702 crore during the nine months ending December’09) and is targeting to scale it up to Rs 5,000 crore over the next three years.