British Telecom Wednesday reported it had offloaded its 5.5% stake in its Indian joint venture (JV) Tech Mahindra to partner Mahindra & Mahindra (M&M) for Rs 451 Cr, around $100.2 million. Under the terms of the agreement, British Telecom sold 6.9 million Tech Mahindra shares to Mahindra & Mahindra at Rs 653.6 per share through bulk deal on NSE on Tuesday, reducing its stake from 30% in the JV to 24.4%.
Tech Mahindra remains a key supplier to British Telecom and, while further sales may be considered in the future, BT expects to continue to have a shareholding in Tech Mahindra for some time. Earlier Mahindra & Mahindra had disclosed that it is, to grant British Telecom a waiver of M&M's pre-emption rights under the Shareholders' Agreement between M&M, TM and BT for the balance of BT's shareholding in TM which M&M has not agreed to acquire, subject to certain conditions.
The deal also includes a provision that, as and when such balance shareholding of BT in TM falls below 10% of TM's issued share capital, the Shareholders' Agreement between M&M, TM and BT will automatically terminate, said the firm. BT and M&M established a joint venture Tech Mahindra in 1986 to provide IT services to the telecommunications sector.
BT had earlier announced the invitation of EOIs (Expressions of Interest) to sell this stake. BT currently holds 30.83% in Tech Mahindra and the transaction is valued at Rs 617 crore ($137mn) at the current market price of 721 rupees per share. Some mutual funds as well as PE funds are said to be interested in the stake. Recently, AT&T sold its Tech Mahindra holding for $154mn which it had bought under an outsourcing agreement. The shares were bought by LIC.
BT, which is struggling with a huge pension deficit, had 30 per cent stake in Tech Mahindra prior to this deal. Post the sale, it will come down to 24.5 per cent, BT said in a statement. M&M’s stake will increase to 48.5 from 43 per cent. The remaining stake is with Mahindra BT Investment Co. Mauritius Ltd.
BT has also indicated, though it expects to continue to have a shareholding in Tech Mahindra for some time, which it may consider further stake sale in the IT firm. Shares of Mahindra & Mahindra settled at Rs. 757.60, down by 1.34 per cent on BSE and Tech Mahindra closed at Rs. 673.20, up 3.88 per cent from the previous close.
Source: Invest India