Indian infrastructure group GTL Infrastructure has stated that a deal to merge with the Reliance Infratel towers business has been scrapped. In a notice to the Mumbai Stock Exchange, the company announced: “The non-bidding term sheet signed by both…
Indian infrastructure group GTL Infrastructure has stated that a deal to merge with the Reliance Infratel towers business has been scrapped. In a notice to the Mumbai Stock Exchange, the company announced: “The non-bidding term sheet signed by both parties dated 27 June 2010 expired on 31 August 2010. Subsequently despite efforts, both parties have neither extended the term sheet nor entered into any definitive agreements as envisaged therein. Consequently, the process of merger as originally contemplated would not take place.”
Reliance has issued no statement at all, and could not be reached by press time.
GTL gave no information as to why the deal was cancelled. A spokesman for the company only confirmed that no agreement could be reached following the expiration of the non-bidding term document, declining to comment further. But an analyst, who wished to remain anonymous, said he believed there may have been valuation issues between the two companies.
The news comes as a surprise, since only a few weeks ago, GTL and Reliance Infratel said they would convert about Rs 60bn (US$1.3bn) of promoters’ loans into equity in order to reduce the amount of debt transferred to the new entity.
Last June, Indian mobile operator Reliance Communications agreed a US$11bn deal to merge its towers subsidiary Reliance Infratel with GTL. The infrastructure company, advised by Standard Chartered, was expected to pay Reliance US$3bn, which would have been used to pay down debt.
Standard Chartered and SBI Capital Markets had reportedly agreed to arrange a US$4bn-US$5bn debt package to finance the deal. The combined entity, comprising more than 80,000 towers, was expected to generate high levels of business by leasing out its infrastructure to Indian telecom operators.
Reliance, which has an estimated US$6.2bn in debt, had also considered selling a 26% stake in itself in order to pay down liabilities that have risen due to participation in the country’s recent spectrum auctions.
The company could not be reached for comment about its plans now that the merger with GTL has fallen through.
