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To: Jeff Vayda who wrote (10634)	10/20/2003 3:06:06 PM
From: Jeff Vayda	Read Replies (1) \| Respond to of 10852

Reliance buys London-based Flag Telecom (off topic, but slightly related in a telecom market upswing eventually could drive satcom usage kinda way.... I wonder if they would be interested in some satellite assets to connect the home front (India) with England and the US? Jeff Vayda Flag saluted with $207M offer ~ thedeal.com / by Chris Nolter and contribution by Josey Puliyenthuruthel in Bangalore / Updated 06:39 PM EST, Oct-16-2003 Almost exactly a year after it emerged from bankruptcy protection, London-based communications services provider Flag Telecom Ltd. attracted a $207 million buyout offer from a unit of Indian conglomerate Reliance Group. The deal, which Flag's board has approved, translates to $95.61 a share, more than 50% above its close on Wednesday, Oct. 15, and miles above the $3 range where it traded a year ago. The transaction with Mumbai, India-based Reliance Gateway Net Pte. Ltd., a wholly owned subsidiary of Reliance Infocomm, still requires approval from regulators and the target's shareholders, who are expected to meet in December. Since exiting bankruptcy in October 2002, Flag's shares have risen dramatically. "There was a natural overhang when we emerged from Chapter 11," said the company's group treasurer, Willem Baralt. To be sure, investors were wary of newly restructured telecoms when the company emerged. And because many of its shareholders were bondholders, who may have been bound through bylaws to hold debt rather than equity, there would have been additional downward pressure on the stock. But since emerging Flag has released some reassuring financial news, Baralt noted. In August, the company said it had signed new customer contracts worth close to $80 million in the first half of 2003. Flag also reduced its debt by 55% when it paid down about $37 million in debt that would have grown in value significantly had it gone unpaid. Flag, an acronym for Fiber Loop Around the Globe, serves primarily international carriers, Internet service providers and other large bandwidth users. As Chapter 11 cases go, its reorganization in the U.S. Bankruptcy Court for the District of Delaware, and its joint proceeding in Bermuda, were relatively swift. The company wiped out $1.4 billion in debt and exited Chapter 11 protection within six months of filing. The company's advisers in the Reliance deal, Akin Gump Strauss Hauer & Feld LLP and Houlihan Lokey Howard & Zukin, represented its unsecured creditors' committee during its bankruptcy case in the U.S. Davis Polk & Wardwell and Deutsche Bank AG advised Reliance. As a customer of Flag, Reliance should be acquainted with the company's management and viability. "This is our first step to look at global communication infrastructure space," said Reliance Industries vice-chairman Anil Ambani at a news conference in Mumbai on Thursday, according to an Indian news agency. Reliance's lines of business include oil and gas exploration and production, petrochemicals, textiles, financial services and an array of others, in addition to telecommunications and information services. The company has revenues of $16.8 billion and net profits of over $990 million. According to its Web site, the group accounts for nearly 3.5% of India's gross domestic product. Aside from being the Reliance's first international acquisition, the deal would also be the largest international buyout of a services company by an Indian company, according to a press release. Reliance isn't the only company to see value in Flag recently. The New York firm HMC Distressed Investment Offshore Manager LLC has acquired a 38% stake in Flag since its exit from bankruptcy. Do you want a feature-rich, ad-free iHub experience?