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Wednesday, Aug 18, 2004

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VSNL gains on news of Intelsat sale

Our Bureau

Mumbai , Aug. 17

INTELSAT'S announcement that it has signed an agreement to be acquired by a consortium of private funds drove up the price of Videsh Sanchar Nigam Ltd (VSNL) on the domestic bourses, on hopes of substantial capital gains for VSNL which has a 5.42 per cent stake in Intelsat.

VSNL shares closed at Rs 173.15 each on the Bombay Stock Exchange, gaining 9.52 per cent over the day.

Intelsat shareholders will be offered $18.75 by Zeus Holdings Ltd, the company formed by the private funds consortium. The price is "subject to adjustment in a specified circumstance" according to an announcement by Intelsat.

The transaction, approved by Intelsat's board of directors, will be of a total value of approximately $5 billion, including $2 billion of existing debt.

For VSNL, which has nine million Intelsat shares, this means an income of $168.75 million or Rs 776 crore (at Rs 46 to the dollar). This means capital gains of over Rs 500 crore, VSNL's acquisition cost of the shares being Rs 254 crore.

VSNL was a founder member of Intelsat, the consortium formed in 1964. When Intelsat was privatised, VSNL was allocated a 5.42 per cent stake in the company.

Currently, there is only the Intelsat announcement. There is no communication from them yet, said sources in VSNL.

"We anticipate that in the next few weeks there will be an air of certainty to the transaction," one of them said.

The transaction also requires approval of shareholders holding 60 per cent of Intelsat's outstanding shares. This approval will be sought in an AGM later this year, according to the Intelsat announcement.

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