Reliance Communications (RCom), has decided to merge its 50,000 telecom tower assets, owned by its 79.7% subsidiary Reliance Infratel (RInfratel), with GTL Infrastructure’s 33,000 towers, to create the world’s largest independent tower company, not owned or controlled by a telecom operator.
Below is an analysis of the merger and the possible structuring of the transaction.
Towers Rcom, through RInfratel GTL Infra (present) GTL Infra
(post merger)
No of towers 50,000 33,000 83,000
Tenants 87,500 39,600 125,000
Tenancy ratio 1.75 1.20 1.51
Present Equity Details RCom RInfratel GTL Infra (present)
In Rs. Crore
Equity 1,032 957.35
FV 5 10
No of shares 206.4 95.7
Market Price (Fri 25th June's closing price) 193.0 45.0
Market Cap (based on Friday's closing price) 39,836 4,308
Debt 33,000 18,000 4,500
Cash Not available 154 460
EV (present) 72,836 8,348
Present Shareholding Pattern RCom RInfratel GTL Infra (present)
ADAG 67.58%
RCom shareholders 32.42%
RCom 79.71%
Other ADAG Group Cos 15.29%
PE investors in RInfratel 5%
Manoj Tirodkar Group 53.42%
Other GTL Infra shareholders 46.58%
Deal Details RInfratel GTL Infra (present)
In Rs. Crore
Enterprise Value (Assumed in proportion of no. of towers) 30,000 20,000
EV/ tower 0.60 0.60
Less: Debt 18,000
Equity value of RInfratel 12,000
Mode of Settlement:
- Cash to RCom - Note A 5,500
- Equity shares in GTL Infra of Rs. 10 each - Note B 6,500
Note A:
How will GTL Infra raise cash to pay RCom? 5,500
(i) Fresh equity shares of Rs 10 each to GTL Infra promoter @ Rs. 45/sh 2,250
- No. of new shares to be issued 50.0
(ii) Debt / term loans (balance) 3,250
Note B:
No. of new shares to be issued by GTL Infra 144.44
(valued at Rs. 45/sh)
Breakup of new shares:
(i) to ADAG (for Rcom holding) 53.87% 77.81
(67.58% of 79.71% holding of Rcom in Rinfratel)
(ii) to RCom shareholders 25.84% 37.33
(32.42% of 79.71% holding of Rcom in Rinfratel)
(iii) to other ADAG companies (for Rinfratel holding) 15.29% 22.09
(iv) to RInfratel PE investors 5% 7.22
Swap Ratio for RCom shareholders
No. of shares to be issued to RCom (i + ii above) 115.14
Existing no. of Rcom issued shares 206.4
No. of GTL Infra shares per Rcom share 0.56 0.56
Present RCom share price has value of Rs. 25 per share towords the tower deal
In Jan 2010, GTL Infra has acquired 17,500 towers from Aircel,in an all cash deal, at an EV of Rs 8,400 crore i.e. EV Rs 48 lakh/tower. The company was to fund this acquistion through equity and debt.
Aircel towers acquisition In Rs. Crore
Deal Value 8,400
Less: Funds accounted for by GTL Infra till 31st March 2010 1,815
Balance to be raised by GTL Infra 6,585
(i) Fresh equity to GTL Infra promoter @ Rs 45 per share 2,385
- No of new shares to be issued 53.0
(ii) Debt / term loans 4,200
GTL Infra can raise limited loans to fund Aircel tower acquisition, as it has debt of Rs. 4,500 crores as on 31-03-10 on its books, besides Rs. 18,000 crore from RInfratel; and it will have to raise further debt to pay cash to RCom.
GTL Infra (post merger) In Rs. Crore
No. of shares (existing + Note A + Note B + Aircel acquisiton) 343.18
FV 10
Equity (new) 3,432
Debt (existing + Note A + Rinfratel debt + Aircel acquisiton) 29,950
Networth (existing + Note A + Note B + Aircel acquisiton) 12,906
Debt Equity Ratio 2.3
EV 50,000
Less: Debt 29,950
Expected Market Cap 20,050
Expected Market Price (Rs/sh) 58.4
Expected Shareholding Pattern of GTL Infra % holding No of shares
ADAG 29% 99.89
RCom shareholders 11% 37.33
PE investors in RInfratel 2% 7.22
Manoj Tirodkar Group 45% 154.14
Present GTL Infra shareholders 13% 44.59
Total 100.0% 343.18
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