Consolidation is the name of the game now, and after some dilly-dallying, Idea Cellular finally bought out promoter B.K Modi’s stake of 40.8% in Spice Communications for Rs 2,720 crore, including non-compete fees (Rs.544 crore). This values Spice at close to Rs.6,800 crore. Idea is India’s fifth largest mobile phone company, and post this deal, expects to add about 4.5 million customers and enter markets in Punjab and Karnataka.

Idea will make an open offer for an additional 20% stake in Spice at Rs.77.30 per share, the same rate at which it bought out Modi, a 42% premium to Tuesday’s closing price. Spice Comm shareholders will get 49 shares of Idea Cellular for every 100 shares held by them.

Telekom Malaysia International (TMI), which holds 39.2 % in Spice, will get 469 million shares in Idea via a preferential allotment at Rs.156.96 per share (Rs.7,200 crore), giving it a close to 15% stake in Idea. The balance from this amount (Rs.4,500 crore) will be used by Idea to become a debt-free company.

 

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