"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.

"BLOCK DEAL NOT POSSIBLE DUE TO PRICE BAND"

Bulk deal in Ranbaxy likely
Move To Help Promoters Save On Rs 1,000-Cr Capital Gains Tax

RANBAXY promoters are likely to use the ‘bulk deal’ route to sell their shares to Daiichi Sankyo. Through this window, they can sell their shares through the stock exchange without being bound by the price restriction of a ‘block deal’ and without having to pay long-term capital gains tax of around Rs 1,000 crore. The Ranbaxy promoters will gross Rs 9,576.3 crore by selling their 34.82% stake in the country’s biggest drug maker.

As reported first by ET in its edition dated June 14, there is a clause in the deal agreement between Ranbaxy promoters and Daiichi Sankyo, which says that the promoters holding will be sold through a stock exchange transaction. A stock exchange transaction of this kind, can be done either through a ‘block’ deal or a ‘bulk’ deal.

As per the norms, a block deal transaction has to be done at a price which is close to the existing market price.

The Sebi circular dated September 2005, said that a trade with a minimum quantity of 5 lakh shares or having a minimum value of Rs 5 crore executed through a single transaction on the stock exchange will constitute a ‘block deal’. This block deal is subject to conditions like time period of trade, delivery-based trading and more significantly a price range, which is not to exceed more than 1% from the existing market price or the closing price of the stock on the previous day.

However, in the case of Ranbaxy, the scrip is trading at a sharp discount to the negotiated price of Rs 737 per share. Therefore, Ranbaxy promoters can sell their shares to Daiichi Sankyo through a block deal, only if the share price shoots up by 26.7% against the closing price of Rs 581.45 at BSE on Tuesday. Bulk deals a way out
THE bulk deal route offers a way out. As per a circular dated January 2004, which brought disclosure norms for large stock deals, all transactions in a scrip, where the total quantity of shares bought or sold is more than 0.5% of the number of equity shares of the company listed on the exchange, are bulk deals.

This is applicable even when the deal is struck through multiple transactions as long as the cumulative shares under consideration exceeds the 0.5% threshold. Incase of Ranbaxy, the transaction would necessarily come under the scope of bulk deal as the total stake being sold is more than 34%. The bulk deal circular of 2004 does not impose any price range condition.

A stock exchange transaction will save the promoters capital gains tax of around Rs 1,000 crore, which they would have to pay if this was an offmarket transaction. Unlike an off-market transaction which attracts a 10% long-term capital gains tax in addition to 1% surcharge and an additional 3% tax on the surcharge, stock exchange transactions do not attract capital gains tax. A bulk deal through the stock market will mean that Ranbaxy promoters will have to pay a nominal securities transactions tax of 0.125% in addition to broker’ fee and 12.5% service tax (on the broker’s fee), which could run into few crore.