"Anil Ambani eyes over 40% MTN pie"

Anil Ambani, whose flagship company Reliance Communications is in talks with South Africa-based MTN, is looking to buy more than 40 per cent stake in the telecom major, a media report said on Tuesday.

"Anil Ambani, chairman of India's Reliance Communications, is considering buying more than 40 per cent of MTN, Africa's biggest wireless company," the Financial Times reported in its Asia edition.

The newspaper also pointed out that the talks have been complicated by the threat of legal action by Anil Ambani's elder brother Mukesh Ambani, who is claiming a right of first refusal over any stake sale by RCom.

The report said that Ambani was looking for ways to increase his "in-effect" controlling position in the South African firm.

Quoting people familiar with the situation, the newspaper said, "... Mr Ambani was looking at how he could maximise an in-effect controlling position in MTN by seeking to persuade the South African mobile operator's shareholders to waive their right to a tender offer."

It has been thought that Ambani would limit himself to a 34.9 per cent stake in MTN, because if it went higher, then he would be required as per the South African laws to make an offer to buyout the other shareholders of the telecom major.

"... Mr Ambani was looking at the case for a "whitewash" procedure under which MTN's shareholders would vote on whether to waive their right to a tender offer. If the shareholders agree, Mr Ambani may end up owing 40-45 per cent of MTN," the report said quoting both people familiar to the situation and a person close to the talks.

Last month, RCom and MTN had entered into a 45-day exclusivity talks to explore the possibility of a merger. These talks had begun on May 26.

Even though, several transaction structures have been examined, no conclusion has been reached yet.

According to the newspaper, Ambani is seeking to engineer a de facto takeover of MTN under which he would swap most of his 66 per cent shareholding in RCom for a near-controlling stake in the merged entity.

"The talks are politically sensitive because MTN is one of South Africa's most successful post-apartheid companies. Any deal with Reliance would almost certainly be presented as a merger," the report said.

"MTN's largest shareholders are Newshelf, a company that holds 13 per cent on behalf of the group's staff, and Public Investment Corporation, a South African state-owned pension fund, which also has 13 per cent," the Financial Times said.

The next largest shareholder in the South African firm is M1, a company that holds almost 10 per cent on behalf of Lebanon's Mikati family.
Further, the newspaper said the precise size of Ambani's share in MTN would be influenced by the take up of an expected tender offer by the African firm to RCom's minority shareholders.