The Hindu Business Line : Vote on Reliance offer on Dec 22 — FLAG board to open talks with Pivotal

A MONTH after the proposed acquisition of FLAG Telecom was announced by Reliance Infocomm, a US-based private equity company, called Pivotal Private Equity, has offered to acquire FLAG Telecom for a $220 million, higher than Reliance's offer of $207 million. This works out to $110 per share, versus Reliance's $95.61 per share.

The Board of Directors of FLAG, which met on November 18 to discuss this offer, has "determined that the communications from Pivotal constitute an offer or proposal that could reasonably be expected to lead to a superior proposal" (as defined in the Amalgamation Agreement with Reliance), says a notice to the Securities and Exchange Commission from the company.

Accordingly, FLAG intends to contact Pivotal to enter into discussions with Pivotal as permitted by the Amalagamation Agreement (with Reliance), said the notice.

"There can be no assurances that any agreement will or can be reached with Pivotal."

Reliance Infocomm spokespersons declined to comment on this development.

Pivotal's offer, sent on November 17, said its proposal was subject to confirmatory due diligence, but not subject to a financing contingency.

Pivotal Private Equity has been described on its Web site as a wholly-owned subsidiary of the Pivotal group, "a sophisticated investment company focused on high-quality real estate assets in premier markets."

Pivotal Private Equity is a provider of equity for middle market corporate acquisitions, its focus being on telecommunications, Internet services, energy, manufacturing, consumer products and leisure industries.

Recently Pivotal agreed to acquire the assets of Pacific Crossing Ltd for $63 million, which operates the PC-1 fibre optic telecommunications network, and also announced the signing of an agreement to acquire control of Network Solutions, the world's largest domain name registrar, from Verisign Inc.

Pivotal, according to its CEO, Mr Jahm Najafi, quoted in one of the company's SEC filings, has the strategy of investing in companies that shape the future of the communications industry. FLAG Telecom probably fits in with this strategy.

"We strive to purchase controlling interests in under-valued strategic assets in volatile markets, attract superior management, make follow-in capital investments as necessary, stabilise and grow the business, and exit in a timely manner to achieve high returns to our investors and ourselves," says a company statement.

Yesterday, FLAG also sent a notice to shareholders for a special general meeting on December 22 to consider and vote on the proposed amalgamation between the company and Gateway Net Bermuda Ltd, a company organised under the laws of Bermuda and a directly wholly-owned subsidiary of Reliance Gateway Net Ltd.

Approval of the amalgamation requires the affirmative vote of 75 per cent of the votes cast at the special meeting.

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