Bharti and MTN back talking
A year after it was rumoured to be on the verge of making a bid that never came, India’s top mobile telephone operator, Bharti Airtel is back in the hunt for its African equivalent MTN.
An announcement by Bharti from New Delhi this morning says the potential transaction would see the Indian group acquire 49% of MTN in return for 36% of its operation. It is proposed that MTN would retain 25% of Bharti with the balance being unbundled to shareholders. Billionaire Sunil Mittal’s group has announced that the two mobile groups have agreed to keep their talks exclusive until the end of July.
Bharti’s statement says: “The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as it is practicable to create a leading emerging market telecoms operator which today would have combined revenues of over $20bn and a combined customer base of over 200 million.”
Sunil Bharti Mittal said “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecoms powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders. This opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation.”
The discussions contemplate that:
- MTN would acquire approximately a 25% post-transaction economic interest in Bharti for $2.9bn in cash and newly issued shares of MTN equal to approximately 25% of MTN.
- Bharti would acquire 36% of MTN’s issued share capital for a consideration comprising R86.00 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts (“GDRs”) for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTN’s acquisition of approximately a 25% post-transaction economic interest in Bharti. This would take Bharti’s stake to 49% of the enlarged capital of MTN. Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by JSE Limited, South Africa.
- Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN
- MTN’s economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board
Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.
Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East. Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd are the financial advisers and AZB & Partners and Bowman Gilfillan are the legal advisers to Bharti.
Bharti & MTN deal – give your views
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