Sony Ericsson is in advanced talks to acquire Spice Mobile. According to Economic Times, Sony Ericsson is in advanced talks with BK Modi of Spice Mobiles to acquire his 64% stake in the company. According to ET, Modi demanded Rs 80-100 per share from the world’s 3rd largest mobile handset manufacturing company means Spice Mobile will be valued at around Rs 700 crore. This is a steep valuation for the company but Modi is an expert in getting good bargain (Spice Communications sale).

Spice Mobile valuations:
On July 10th: Rs 177 crore (Share price-22.7)
Modi asking rate: Rs 700 crore (share price 80-100).

If this takeover materialises, it will be a windfall for the shareholders of Spice Mobile. Sony Ericsson is in desperate need to get strong foothold in fastest growing Indian market. Nokia is holding more than 65% market share but Sony has good presence in high end market. If Sony Ericsson acquires Spice Mobile, it will give access to low end market.

In India, major growth is happening in the cheap mobile handset segment. Even though this segment offers low margins but it is high in volumes. Unless one gets a strong foothold in this segment, it is impossible to gain market share in India. Even though Spice Mobile is a late entrant in India, it is ideally positioned to give tough competition to Nokia. Sony Ericsson is buying Spice Mobile to make strong presence in this segment.

Spice Mobile stake holdings:
Promoters: 64%
Public: 14%
Other corporate: 22%

If Sony Ericsson acquires Modi’s 64% stake in Spice Mobile, it will need to make an open offer, according to regulations. Closely follow this scrip. If Sony Ericsson acquires Spice business, it will become the second largest mobile handset company in India.