MTN’s big deal
First off, the news was leaked to the Financial Times long before talks between the two companies had progressed.
It was never clear who leaked the news but given that MTN had just announced first-quarter figures and spoken widely to analysts and press the week before the news broke, it seems obvious the big mouth was in MTN’s camp.
The talk sent the share soaring (by more than 20% at its highs) and made the usual suspects, the fund managers, greedy for more.
MTN’s share averaged R123,8 this year until the Bharti bid was mooted. It then reached R160 — but some maintained an offer of R165 was still not enough.
Sure, MTN has growth potential, but this was to be a merger, not a buyout. And therein lay the third problem. A merger between two huge companies is rare, if not impossible. One company always ends up with the upper hand. And with the Bharti/MTN talks being pre-empted by the press and then by the market’s reaction, you can bet negotiations in the boardrooms were prickly at best. There would have also been egos to take into account.
MTN spent a month talking with Bharti. It is now scheduled to spend 45 days talking with Reliance Communications, Bharti’s big Indian rival. That’s a lot of time for management to take their eyes off the ball. And if the Reliance talks also don’t work out, MTN’s reputation in global financial markets will take a knock.
But MTN will bounce back — there’s no denying it is an impressive company with a growth strategy that has served it well. But hopefully recent lessons learnt will make future deals that bit smoother.
Lessons such as: keep quiet until the deal is in the bag; don’t be fooled into believing your company is worth more than what someone is willing to pay for it; and don’t use the word “merger” unless you really mean it.
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