Will Essar go to court over RoFR tangle?

Will the Essar group move the court on the controversial right of first refusal (RoFR) issue? While the group is keeping mum on the issue, sources say there are enough reasons to believe that it may hit the court in its battle with joint venture partner Hutchison.

The Essar group has roped in Zia Mody’s AZB & Partners, one of India’s top law firms specialising in mergers and acquisitions, to represent it in case the Ruias’ RoFR is infringed, sources close to the development told ET.

At the same time, It is learnt that one more round of discussions is slated to take place between Hutchison and Essar this week in Hong Kong to resolve their differences and prevent the matter from going to court.

Meanwhile, the consortium of banks that has decided to lend money to the Essar group has also hired J Sagar & Associates to work out the terms and conditions for the loan. The Essar group has reportedly tied up $20 billion for funding the acquisition of Hutchison Telecommunications International (HTIL)’s 67% stake in HEL.

“In the case of a leveraged buyout of HEL, the lawyers at J Sagar will assure that all the necessary conditions are fulfilled. Such big and complicated transactions require a lot of legal back-up. Companies and banks have to be prepared for legal action by any side any time,” sources said.

When contacted by ET, an Essar spokesperson said: “We would not like to comment.” Despite hectic developments, any legal move is unlikely in the next two or three weeks, sources said.
“AZB has been hired to prepare any possible case on RoFR. But a petition will be filed only if an interested party (say RCL or Vodafone) makes an offer for buying the 67% stake of Hutchison and the Ruias are not asked to match the bid,” legal experts said.

While UK giant Vodafone and RCL are conducting due diligence for HEL, there is no reason for Essar to move the court at this stage. “The interested parties will submit their bids only by the end of this month or early February. At that stage, if the Ruias are not allowed to bid, then the Bombay HC will be moved,” sources added.

According to experts, the RoFR will come into play only after final bids for HEL (being valued at upwards of $20 billion) are submitted. The two JV partners differ over the interpretation of RoFR. While the Ruias claim that it is applicable in case of sale to any party, HTIL said it comes into play only if the sale is made to RCL, the Tatas or Bharti Airtel.