"Sunil Mittal tries to win MTN shareholders"

MUMBAI: Bharti Airtel chairman Sunil Mittal is expected to meet the Beirut, Lebanon-based Mikati family in continuation of the charm offensive to win over prominent MTN shareholders. The Mikati family owns over 11% in MTN.

Sources in the know said Mr Mittal is likely to meet Azmi Mikati, CEO of the family’s investment vehicle M1, shortly. The Mikati brothers founded Investcom, which was taken over by MTN two years ago through a cash-cum-share offer to create the biggest mobile operator in Africa and the Middle East.

However, the exact date and venue of the meeting has not been finalised. Sources said it is common for the acquirer in any negotiated takeover bid to earn the trust and confidence of the prominent shareholders before putting a formal offer on the table.

Mr Mittal has discussed his plans threadbare with MTN CEO Phuthuma Nhleko in London, they said. However, Bharti Airtel spokesperson declined to comment.

Mr Mikati and Mr Nhleko are equally important as far as shareholding of MTN is concerned. The Mikati family’s M1 and Newshelf664, a firm owned by the MTN management, control Alpine Trust, the largest shareholder of MTN with a 23% holding.

M1 and Newshelf664 pooled their shares to form the trust two years ago when MTN took over Investcom. The other major shareholder of the Johannesburg stock exchange-listed MTN is PIC, a S African government-owned pensions fund, which has 13.5%. The remaining shares are widely held.

Sources said Bharti is likely to create a special purpose vehicle to acquire shares of the Alpine Trust. The SPV will also buy shares from some other investors. Under the South African law, the SPV will have to make a mandatory open offer once its holding reaches 35%.

Mr Mittal may sell shares of Bharti to fund the acquisition, which is pegged at $20-24 billion. Bharti is learnt to have commitments of Standard Chartered Bank and Goldman to raise debt of $12 billion.

It is also expected that SingTel, which directly and indirectly holds a 30.5% stake in Bharti, will join Bharti to bid for the South African telecom major MTN. Deutsche Bank and Merrill Lynch are advisors to MTN.

The options being discussed by both the parties include the top management of MTN will acquire Bharti shares and the companies will set up an integrated management committee, combining top brass of both the companies, to monitor their operations. Mr Nhleko may head this committee, if it is put in place.

Analysts said Bharti will not have much difficulty to service a debt of around $12-14 billion. They said the interest outgo will be partially offset by the dividend it is expected to earn from MTN.

Others may also join the race. Saudi Telecom, Etisalat and French Telecom are the possible contenders, analysts said. China Mobile on Thursday said it is not bidding for MTN although it is interested in South Africa.