The merger deal between Idea Cellular and Vodafone India values equity shares of the Aditya Birla Group company at about Rs 109.76 at the time of completion of the merger, 2% below its present trading value.
According to the terms of the contract, when the merger of Vodafone India with Idea is completed, Idea will issue a certain number of shares in itself to Vodafone so that Vodafone ends up having 50% of the combined company.
After this, the Aditya Birla group will buy 4.9% of the new company from Vodafone at Rs 38.75 bln (Rs 3,875 cr).
This gives the combined entity a valuation of Rs 790 bln or Rs 79,061 cr. Given that Idea shareholders will get 50% of this, the price being put on Idea’s current equity base is Rs 39,531 cr.
The total number of shares outstanding for the company is 360.2 cr. Dividing the value of the company by number of shares gives a valuation of Rs 109.76 per share.
Given that the deal will take around 6 to 8 months for completion due to the various regulatory clearances required, the net present price implied for the company’s shares is only around Rs 104 each.
The per-share price seems to have disappointed some of the investors who were hoping to make a big killing when the deal was announced. After fluctuating between Rs 123.50 and Rs 92.35, the share price of the company has settled around the Rs 100 mark.