GTL calls-off merger plans with Redington

The Mumbai-based Rs 640 crore network engineering and IT services company GTL Limited has called off its plans to acquire the Singapore-based Redington group. According to the Bombay Stock Exchange (BSE), the two groups have informed it that, they have mutually decided to call off the proposed merger of Redington Group with

GTL.

According to GTL's Chief Investor Relations Officer LY Desai, though Redington was ready to extend vendor relationships to GTL, its continuance could not be guaranteed unconditionally over 3-5 year time period by the company's present shareholders. According to him, "Redington has relationship with various vendors who have been given financial guarantees.

While Redington's vendor relationships would have otherwise helped GTL's enterprise solutions and business process outsourcing, the financial guarantee is a risk that the GTL management is not ready to bear." 

Desai also said that the Redington shareholders have also given financial significant amount of guarantees to their bankers and these, if reflected in GTL balance sheet, would make the deal commercially unviable to GTL and its shareholders. "As a result of these changed circumstances, GTL and Redington have mutually agreed not to proceed further with the transaction," he reiterated.

According to a GTL press release, the company would, however, continue to pursue the acquisitions that would match the synergies of its network engineering and IT services business. The company which has earmarked Rs.200 - 250 crore for growth through inorganic route, had earlier announced its plans for acquisition of Singaporean IT firm Redington group comprising Redington India, Redington Pte Ltd, Singapore and Redington Gulf FZE and MiddleEast at a price tag of $ 95 m, which amounts to around Rs 450

crore).

The cash and stock deal was payable through $ 45 m in stock swap and the remaining $ 50 m in cash. The deal had been on valuations conducted by Deliotte Haskins and Sells and ICICI Securities and Finance Company Ltd. The consolidated revenues of the combined entity were estimated to be over Rs 3000

crore. 

Cyber News Service