MUMBAI, APR 9 : Fair valuation of minority stake in joint venture at core of dispute; different worth of shares in two Essar entities a thorny issue.
Vodafone’s $5-billion confrontation with its Indian telecom joint venture partner, Essar, is now set to get embroiled in regulatory drama, as the ball has been pushed to the Reserve Bank of India’s court.
Last Wednesday, Essar had decided to exercise its underwritten call option for two-thirds of its 33% stake, two months ahead of the option window closing. Vodafone officials claimed the original shareholders’ agreement of 2007 gave them, in such an event, the automatic right the exercise their “call” option for the residual 11%as well.
In 2007, Vodafone granted options to Essar, giving it the right to sell its entire stake for $5 billion or to dispose of a part of it at a fair market value arrived at by an independent entity. But soon this deal has become the latest area of confrontation between the two JV partners, with Essar planning to seek legal arbitration against Vodafone and also deciding to continue the reverse listing plans of its group entitities.