Tata Group's VSNL (Videsh Sanchar Nigam Ltd.) (NYSE:VSL) made today a $239 million bid for Teleglobe.  VSNL is pretty much the leading Indian ISP and major portals such as MSN India, Indiatimes, Yahoo! India, Rediff, etc. are hosted by the company.  VSNL also is interconnected to a vast array of international service providers (e.g. Teleglobe, Telecom Italia, MCI, Cable & Wireless, Singtel, etc. on the international side via submarine cables).  The bid includes both the assumption of the Teleglobe debt ($61 million) and a premium on the Teleglobe Nasdaq price ($4.50 / share, about 20% percent over the price of the stock).

VSNL hopes to recover the cost in the next 4-5 years.  The acquisition could give VSNL access to an extensive global network of Teleglobe "reaching more than 240 countries and territories with advanced voice, data and signaling capabilities, and ownership interests or capacity in more than 80 subsea and terrestrial cables".

The transaction has to be approved by the shareholders and then pass the mandatory regulatory review, but once it is completed, the new company will become one of the biggest global players in voice, Internet and bandwidth services.  Teleglobe represents yet another piece in the VSNL puzzle (after the purchase of Tyco's global undersea telecom network late last year). 

Great for VSNL.  But what about Cerberus and TenX - did they maximize its value on this transaction?  The Canada.com article said BCE paid Can$ 7.4 billion for Teleglobe in 2000.  I found this Angus Telemanagement note (dated February 2000) that pegged the purchase of 77% of Teleglobe for $9.65 billion in BCE stock.  Granted, that was at the height of the bubble.  For kicks and giggles, let's take a look at Nortel stock at that time (which was worth around Can$80-$90 - let's say Can$85).  OK, today NT stock is about Can$3.20.  So let's take the average of the Teleglobe prices (assuming the $9.65 billion is 100%, not just 77%) - Can$8.45 billion.  

If that valuation is true, that means that Nortel stock, despite its fall, still would be the "better" investment (from Feb. 2000 until now) compared to Teleglobe: Nortel stock today is worth 3.76% of its Feb. 2000 value, compared to what Cerberus and TenX will get for Teleglobe (only 3.45%) - granted, the two capital management companies did not pay the same amount for Teleglobe as BCE once did (wonder what kind of multiple they got - if anyone knows, please let me know).  Hmmm... could some other player (like an euro player with deeper pockets and still having a good currency to back the purchase - France Telecom or Deutsche Telekom) have offered more money?