Reliance raises Flag bid by $4m

Reliance Gateway Net, a subsidiary of Reliance Infocomm, has increased its bid price for Flag Telecom, a leading provider of international wholesale network transport and communications services by $4 million to $211 million in cash.

The fresh bid reflects a new per share price of $97.41 against the earlier bid price of $95.61 a share, aggregating $207 million.

It has entered into a second amendment to its earlier agreement and plan of amalgamation with Reliance Gateway Netway on December 5, according to a press release on the Flag Telecom Web site.

Further it has also entered into a voting agreement with the largest shareholder of Flag Telecom, Harbert Distressed Investment Master Fund, Ltd (Harbert), to vote in favour of the amalgamation between Flag Telecom and Reliance Gateway.

Harbert has about 37.1 per cent interest in Flag Telecom's outstanding common shares.

Reliance Gateway has agreed to pay Harbert $1 million in cash upon the consummation of the amalgamation. A Reliance Infocomm spokesperson, however, refused to comment on the development.

Patrick Gallagher, co-chairman and chief executive officer, Flag Telecom, in the press release, said: "We continue to make good progress towards amalgamating Flag Telecom with Reliance Gateway. With the agreement with Harbert we have achieved a key milestone towards obtaining the requisite vote to approve the amalgamation."

Reliance has bettered its bid considering an Arizona-based equity research Pivotal Private Equity offering to buy Flag Telecom at $220 million, $13 million more than Reliance Gateway`s offer of $207 million.

Pivotal was offering not less than $110 for each of the 2,000, 000 outstanding shares of Flag Telecom compared with Reliance's offer of $ 95.61 per share.

Flag Telecom has convened a special shareholders' meeting on December 22 in New York for a shareholder nod for amalgamation.

Meanwhile, Flag has in its release said,  "As part of the voting agreement with Harbert, Flag Telecom has agreed to terminate the registration of its common shares under the Securities and Exchange Act of 1934, as amended, prior to the date on which Flag Telecom holds a special meeting of shareholders in order to vote on the amalgamation. A Form 15 was filed with the Securities and Exchange Commission on Monday and Flag Telecom intends to seek to accelerate the deregistration."

Flag has indicated that it intends to continue to file with the SEC the periodic reports that it would have filed in the absence of the deregistration.