Taking the Ruias head on, Hutchison has made it clear to prospective bidders that it can sell its 67 per cent stake in Hutchison Essar without offering the first right of refusal to the Ruias who hold the remaining 33 per cent in the joint venture.
Sources close to Hutchison said it could sell the stake to Vodafone, foreign buyout funds or Reliance Communications and its consortium partners without having to go to the Ruias first.
They said this was possible because the shareholders' agreement gave the Ruias the first right of refusal when Hutchison's stake in Hutchison Essar fell below 40 per cent "and" it sold more than a 10 per cent stake to Reliance, Tatas or the Bharti group.
The operative word in the agreement was "and," which meant that both the conditions had to be triggered simultaneously for the Ruias to have the first right of refusal. Had the word been "or" instead of "and," the situation would have been different, the sources added.
Thus, as the second clause would not be triggered, the agreement left Hutchison free to offload its entire 67 per cent stake to Vodafone.
This interpretation has obviously been questioned by the Ruias. A spokesperson for the Ruias said the whole issue was a matter of interpretation and their interpretation was totally different from that of Hutch.
A Hutchison spokesperson in Hong Kong said, "On matters related to the shareholders' agreement, we prefer not to comment publicly."
He declined comment when asked if the Ruias had contested this interpretation of the shareholders' agreement that did not grant them the first right of refusal.
Reliance Communications, the sources added, could get round the agreement conditions by picking up less than 10 per cent of the Hutchison stake, while the remaining was bought by buyout funds like Blackstone, Carlyle Group, and KKR, which are supporting the company in its bid.
In this case, only the clause of Hutchison's stake falling below 40 per cent would be activated, while the second clause against Reliance having more than 10 per cent stake was not, again denying the Ruias the first right of refusal.
Both sides have taken legal opinion on the issue.
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