Tata Sons to acquire majority stake in telecom firm Tejas Networks

Tata Sons will acquire a total of 69.35 per cent in listed telecom firm Tejas Networks in a deal which will bolster Tata group’s 5G capacity. 

Under the deal, Tata Sons affiliate Panatone Finvest will subscribe to equity shares and warrants cumulatively amounting to Rs1,884 crore, excluding the open offer for 26 per cent of the outstanding shares of Tejas.  
Panatone will pay Rs 258 apiece for Tejas Network shares, at a premium to Wednesday’s closing price of Rs234 per share.   
Tejas said it will use the funds to invest organically and inorganically in research and development, sales and marketing, people, infrastructure and to enhance manufacturing and operational capabilities.  
Tejas expects the telecom sector to offer a “very large opportunity” in the domestic as well as global markets with the new cycle of investments in 5G and fibre-based broadband rollouts.
“We are excited to partner with Tejas, India’s leading telecom and network company with a strong DNA of R&D. We look forward to working with the highly experienced management team of Tejas and creating a full stack of globally competitive wireline and wireless products,” Saurabh Agrawal, executive director of Tata Sons Pvt Ltd, said.   
As per the terms of the agreement, Panatone will initially invest Rs500 crore to acquire 17.14 per cent equity shares of Tejas at Rs258 apiece.
It will also make a preferential allotment of warrants with a 11 month validity amounting to Rs950 crore, to raise Tata Sons’ stake in Tejas to 37.49 per cent, as per the stock exchange filings. 
This will trigger an open offer for 26 per cent of the outstanding shares. 
Tejas, however, will be allotting a second set of warrants amounting to Rs400 crore tp Panatone, which may be exercised by the acquirer one year from the date of allotment.  
If Panatone choose to exercise the optionbefore 18 months from the date of allotment, it will be acquiring 43.35 per cent in Tejas excluding the 26 per cent open offer that it will have to make. This will take Tata Sons’ stake in Tejas Networks to 69.35 per cent post open offer. 
The board of directors of Tejas Networks has approved the preferential allotment of equity shares and warrants and would now require shareholders’ approval and other customary closing conditions and approvals. 
“This association provides us the necessary financial resources, global relationships and strong ecosystem to innovate and scale our business,” V Balakrishnan, chairman of Tejas, said.  
Sanjay Nayak will continue as managing director and chief executive of Tejas along with the existing management through the next phase of growth.
“The association with Tata group will accelerate the realisation of this vision and enable us to address the large market opportunity available to us to build a financially strong global company, backed by a trusted brand. I am fully committed to making this a success and am excited about the next phase of our journey,” Nayak said.   
Kotak Mahindra Capital Company is acting as the manager to the open offer and Khaitan & Co is acting as the legal advisor to the transaction.