In its first overseas acquisition, the Reliance group has amalgamated the United States-based Flag Telecom for $ 211 million [roughly Rs 950 crore (Rs 9.50 billion)]. The Flag acquisition is so far the largest overseas acquisition by any Indian company.

At a special meeting at The Mark Hotel Street in New York, where over 88.8 per cent of the shareholders were represented, the votes cast were unanimously in favour of the proposal to amalgamate Flag Telecom and Reliance Gateway Net, a wholly owned subsidiary of Reliance Infocomm. The two companies had signed a memorandum on October 16, 2003.

Speaking after today's meeting, Patrick Gallagher, co-chairman and CEO, Flag Telecom, said: "The outcome of today's vote is highly significant for both companies. For Reliance, it marks a major step towards its vision of establishing the Reliance group of companies as a world-class global telecommunications player. For Flag, it brings a strong base for future growth and opportunities to drive forward its strategy while contributing to the Reliance Group vision."

With this deal, Reliance will get access to Flag's more than 180 customers, many of which are among the world's leading telecommunications and Internet companies, including the top ten international carriers.

Reliance Gateway had initially offered $207 million for the beleaguered Flag but weeks later raised its offer to $211 million when Pivotal, a private equity investor, put in a higher bid of $220 million.

On January 8, a third party (whose identity has not been revealed so far) made a fresh bid to acquire Flag Telecom for $240 million. Flag reported to the Securities Exchange Commission that its board had decided not to pursue the bid.

Meanwhile, Reliance Gateway has already secured "beneficial" votes, amounting to around 45.7 per cent of the equity, by entering into two agreements, one with Flag's largest shareholder Harbert Distressed Investment Master Fund (37.1 per cent) and another with funds, the Triage Offshore Fund and Triage Management LLC, which collectively hold 8.6 per cent.

The agreement was that the two shareholders would vote in favour of the amalgamation agreement. The votes were secured prior to the shareholders' meeting.

After the shareholder approval, Reliance Gateway will need to secure the United States Federal Communication Commission's consent to transfer control of Flag Telecom licences to Reliance Gateway.

Flag's network includes the Flag Europe-Asia, which links the telecommunications markets of Western Europe and Japan through West Asia, India, Southeast Asia and China, through approximately 28,000 km of undersea fibre optic cables.

The Flag Atlantic-1 is a 14,500-km city-to-city service linking New York, London and Paris -- the world's first and only trans-oceanic loop system.

The Flag North Asian Loop offers intra-regional, city-to-city connectivity between the high traffic centres of Hong Kong, Seoul, Tokyo and Taipei.