The leading mobile phone group Bharti Airtel declined comment on media reports on Friday that its negotiations to merge with Africa's top cellular player MTN were entering a crucial phase.
Bharti might offer the chairman's post of the proposed merged colossus to South Africa's MTN group chairman M.C. Ramaphosa in a bid to sweeten its overtures, the media reported.
Bharti's billionaire chairman Sunil Mittal would be deputy chairman and group chief executive officer while MTN chief executive officer Phutomo Nhleko would be deputy group CEO, the paper reported, quoting unnamed bankers it said were close to the talks.
"We have no further comment beyond our earlier statement... that discussions being held are aimed at combining the strengths of two players from emerging markets," a Bharti official, who wished to remain unnamed, said. The company has said it is "veering toward possible structures to achieve this objective."
Bharti's run for the South African flagship group were now at a "crucial negotiation phase," the Times of India reported. Mittal has met several times with top MTN officials in London since Bharti announced earlier this month the two companies were in "exploratory talks".
Bharti wants to acquire a 51 percent stake. But MTN, which serves 21 markets across Africa and the Middle East, is pushing Bharti to buy out 100 percent of the company in a transaction that could be portrayed in South Africa as a merger of equals, reports said.
A merged group would create a mobile behemoth with a network of 130 million subscribers 68.2 million from MTN and 62 million from Bharti -- that would dominate two of the world's fastest growing markets India and Africa.
Originally the price tag for MTN was quoted at 40 billion dollars for a 100 percent buyout of MTN but now the figure is up to 50 billion dollars or 25 dollars a share, based on MTN's surging stock price and analyst expectations that Bharti might have to pay a possible 25 percent premium.
Mittal is also seeking an exclusivity agreement with MTN to be signed this week barring MTN from sharing any information for a merger with any other firm, Indian newspapers reported.
But MTN's management is balking, saying it would be "anti-shareholder," the Times of India said. If successful, Bharti's deal would easily eclipse Tata Steel's 13-billion-dollar takeover of Corus Steel last year, India's biggest foreign acquisition so far.
Tuesday, May 20, 2008
Wednesday, May 14, 2008
"Bharti may buy MTN by paying cash and equity"
ndia's largest telecom company Airtel hinted at plans to forge a merger with Africa's largest telco, MTN.
In a statement, Bharti said that it has not made any bid for MTN nor is it required to make any bid. “The discussions being held are aimed at combining the strengths of the two leading emerging markets players and accordingly veering towards possible structures to achieve this objective,” the company said.
The statement clears some of the confusion over how the deal could be structured. Though the Bharti statement does not say it in so many words, industry observers and M&A experts feel that the deal could be achieved through a merger. People close to the situation said that Bharti is exploring the possibility of buying 100% of MTN through a ‘scheme of arrangement’. Bharti will compensate MTN shareholders in cash as well as stock.
About $20 billion of the total acquisition value (which is $45 billion) will be in cash, which Bharti will raise through a combination of debt and internal accruals. The remaining amount of about $25 billion will be paid in Bharti stock. Since Bharti is not listed in South Africa, it will have to make a listing in order for the deal to go through.
South African regulations allow foreign companies to list in the Johannesburg stock exchange. This is called a secondary listing of foreign companies. Several companies, including some well-known names like BHP Billiton, Investec Plc, Old Mutual and SABMiller have secondary listings in Johannesburg with the primary listing elsewhere.
Bharti, people with knowledge of the deliberations say, will list on the Jo’burg stock exchange and its shares will be issued to MTN shareholders. It could be a massive issue, the biggest from any Indian company and one of the biggest in the world. Over half of Bharti’s current market capitalisation of about $40 billion will have to be issued to investors for the deal to go through. Whether Bharti will eventually make such a humungous public issue remains to be seen, but company executives are believed to be considering this option.
Once Bharti acquires 100% of MTN, it will be merged with Bharti, with the combined entity being called MTN Airtel. Sunil Bharti Mittal will be the non-executive chairman while Phuthuma Nhleko will be the CEO of the new entity. MTN chairman Cyril Ramaphosa is unlikely to be on the board.
The Bharti-MTN combine will be the world’s sixth largest telco with close to 130 million customers. It will also have access to the world’s fastest-growing mobile markets — Africa, West Asia and South Asia.
Explaining the broad contours of the deal, an industry source, who claimed to be in the know of things said: “Bharti has already got commitments from leading global banks to the tune of $18 billion. So, the company can readily raise up to $20 billion in debt. Bharti will then issue fresh equity of around $25 billion in the form of depository receipts.
The $25 billion worth of fresh equity can be used for share swap with large MTN shareholders such as the Alpine Trust and South African pension fund PIC. This will result in MTN shareholders holding on to the fresh equity in Bharti Airtel. This formula will see MTN shareholders hold 38% in the combined entity. In effect, the merger will translate into a 100% buyout.”
The Bharti spokesperson refused to comment on this possibility. A statement from MTN said they did not wish to comment further or add to an earlier statement on May 5.
This model will provide Bharti with up to $20 billion in cash (debt plus internal accruals) to buy close to 50% in MTN, while the rest of MTN’s stock would be swapped with Bharti Airtel stock. According to industry sources, this will also enable Bharti to meet pre-conditions put forward by MTN such as the company’s current CEO Phuthuma Nhleko heading the mobile business arm of the combined entity and Bharti awarding three places on its board to the MTN top brass.
Industry sources also said that buying out MTN shareholders such as the Alpine Trust and South African pension fund PIC through a share swap will enable Bharti to comply with South African regulations, which stipulate that a minimum 25% of a local company’s equity and 40-50% management control should be with local Black investors. (The Mikati family and Newshelf combined form the Alpine Trust - The Mikati family of Lebanon owns 10% and Newshelf owns 13% in MTN through the Alpine Trust.)
If this model translates into reality, the final shareholding structure of the Bharti-MTN combine will be as follows — Sunil Mittal with 15%, SingTel about 19% by virtue of its holding in Bharti Airtel, South African shareholders with about 36%, while the rest will be with the public, industry sources added.
It is also learnt that Mr Mittal and the Bharti MD Akhil Gupta are scheduled to meet Lebanon’s Mikati family which holds close to 10% stake in the south African telco, Mr Nhleko and other top management executives in a couple of days to discuss the corporate structure of the combined entity. Industry sources here say that following the meeting, both companies are likely to announce the signing of a non-disclosure agreement, the first step towards giving Bharti access to MTN’s books so that it can begin ‘due diligence.’
Industry sources also add that MTN may have already committed to an ‘exclusivity agreement’ with Bharti. This implies MTN will not disclose the terms of arrangement to any other party. Sources also added that only after the completion of due diligence from both sides would Bharti make a final offer to MTN shareholders which could be upwards of 175 rand a share. At 175 rand a share, MTN would be valued at around $45 billion.
In a statement, Bharti said that it has not made any bid for MTN nor is it required to make any bid. “The discussions being held are aimed at combining the strengths of the two leading emerging markets players and accordingly veering towards possible structures to achieve this objective,” the company said.
The statement clears some of the confusion over how the deal could be structured. Though the Bharti statement does not say it in so many words, industry observers and M&A experts feel that the deal could be achieved through a merger. People close to the situation said that Bharti is exploring the possibility of buying 100% of MTN through a ‘scheme of arrangement’. Bharti will compensate MTN shareholders in cash as well as stock.
About $20 billion of the total acquisition value (which is $45 billion) will be in cash, which Bharti will raise through a combination of debt and internal accruals. The remaining amount of about $25 billion will be paid in Bharti stock. Since Bharti is not listed in South Africa, it will have to make a listing in order for the deal to go through.
South African regulations allow foreign companies to list in the Johannesburg stock exchange. This is called a secondary listing of foreign companies. Several companies, including some well-known names like BHP Billiton, Investec Plc, Old Mutual and SABMiller have secondary listings in Johannesburg with the primary listing elsewhere.
Bharti, people with knowledge of the deliberations say, will list on the Jo’burg stock exchange and its shares will be issued to MTN shareholders. It could be a massive issue, the biggest from any Indian company and one of the biggest in the world. Over half of Bharti’s current market capitalisation of about $40 billion will have to be issued to investors for the deal to go through. Whether Bharti will eventually make such a humungous public issue remains to be seen, but company executives are believed to be considering this option.
Once Bharti acquires 100% of MTN, it will be merged with Bharti, with the combined entity being called MTN Airtel. Sunil Bharti Mittal will be the non-executive chairman while Phuthuma Nhleko will be the CEO of the new entity. MTN chairman Cyril Ramaphosa is unlikely to be on the board.
The Bharti-MTN combine will be the world’s sixth largest telco with close to 130 million customers. It will also have access to the world’s fastest-growing mobile markets — Africa, West Asia and South Asia.
Explaining the broad contours of the deal, an industry source, who claimed to be in the know of things said: “Bharti has already got commitments from leading global banks to the tune of $18 billion. So, the company can readily raise up to $20 billion in debt. Bharti will then issue fresh equity of around $25 billion in the form of depository receipts.
The $25 billion worth of fresh equity can be used for share swap with large MTN shareholders such as the Alpine Trust and South African pension fund PIC. This will result in MTN shareholders holding on to the fresh equity in Bharti Airtel. This formula will see MTN shareholders hold 38% in the combined entity. In effect, the merger will translate into a 100% buyout.”
The Bharti spokesperson refused to comment on this possibility. A statement from MTN said they did not wish to comment further or add to an earlier statement on May 5.
This model will provide Bharti with up to $20 billion in cash (debt plus internal accruals) to buy close to 50% in MTN, while the rest of MTN’s stock would be swapped with Bharti Airtel stock. According to industry sources, this will also enable Bharti to meet pre-conditions put forward by MTN such as the company’s current CEO Phuthuma Nhleko heading the mobile business arm of the combined entity and Bharti awarding three places on its board to the MTN top brass.
Industry sources also said that buying out MTN shareholders such as the Alpine Trust and South African pension fund PIC through a share swap will enable Bharti to comply with South African regulations, which stipulate that a minimum 25% of a local company’s equity and 40-50% management control should be with local Black investors. (The Mikati family and Newshelf combined form the Alpine Trust - The Mikati family of Lebanon owns 10% and Newshelf owns 13% in MTN through the Alpine Trust.)
If this model translates into reality, the final shareholding structure of the Bharti-MTN combine will be as follows — Sunil Mittal with 15%, SingTel about 19% by virtue of its holding in Bharti Airtel, South African shareholders with about 36%, while the rest will be with the public, industry sources added.
It is also learnt that Mr Mittal and the Bharti MD Akhil Gupta are scheduled to meet Lebanon’s Mikati family which holds close to 10% stake in the south African telco, Mr Nhleko and other top management executives in a couple of days to discuss the corporate structure of the combined entity. Industry sources here say that following the meeting, both companies are likely to announce the signing of a non-disclosure agreement, the first step towards giving Bharti access to MTN’s books so that it can begin ‘due diligence.’
Industry sources also add that MTN may have already committed to an ‘exclusivity agreement’ with Bharti. This implies MTN will not disclose the terms of arrangement to any other party. Sources also added that only after the completion of due diligence from both sides would Bharti make a final offer to MTN shareholders which could be upwards of 175 rand a share. At 175 rand a share, MTN would be valued at around $45 billion.
Tuesday, May 13, 2008
"Bharti may raise bid offer for MTN"
Bharti Airtel, India's largest cellular operator, is planning to raise its offer to about $22.63 per share to acquire control of South African mobile player MTN, according to a media report.
Quoting a person familiar with the 'deal,' the Wall Street Journal said on Monday that Bharti is considering raising the offer to about 175 South African rand (or $22.63) per share for control of MTN.
"There is no official bid yet and MTN management insists that it be a minimum 200 South African rand per share," the WSJ reported, quoting the person, in an article published in its online edition.
When contacted, a Bharti spokesperson declined to comment.
Last week, both Bharti and MTN announced that they are in 'exploratory talks' which may or may not lead to a deal. The person said the official bid could still be the original 160 rand to 165 rand, 'depending on the terms of the agreement, how big of a stake MTN is willing to sell and other factors,' the WSJ reported.
Media reports said that Bharti -- whose market capitalisation as on May 9 stood at Rs 159,841.77 crore (Rs 1,598.417 billion) could make an official bid for MTN this week for a 51 per cent stake.
Earlier, media reports said that Bharti is looking at acquiring 51 per cent stake in MTN for about $19 billion.
If the deal takes place, it will create world's sixth largest mobile company with 130 million subscribers in more than 20 countries.
In afternoon trade, Bharti was trading at Rs 825.90, down 1.99 per cent on the Bombay Stock Exchange.
Quoting a person familiar with the 'deal,' the Wall Street Journal said on Monday that Bharti is considering raising the offer to about 175 South African rand (or $22.63) per share for control of MTN.
"There is no official bid yet and MTN management insists that it be a minimum 200 South African rand per share," the WSJ reported, quoting the person, in an article published in its online edition.
When contacted, a Bharti spokesperson declined to comment.
Last week, both Bharti and MTN announced that they are in 'exploratory talks' which may or may not lead to a deal. The person said the official bid could still be the original 160 rand to 165 rand, 'depending on the terms of the agreement, how big of a stake MTN is willing to sell and other factors,' the WSJ reported.
Media reports said that Bharti -- whose market capitalisation as on May 9 stood at Rs 159,841.77 crore (Rs 1,598.417 billion) could make an official bid for MTN this week for a 51 per cent stake.
Earlier, media reports said that Bharti is looking at acquiring 51 per cent stake in MTN for about $19 billion.
If the deal takes place, it will create world's sixth largest mobile company with 130 million subscribers in more than 20 countries.
In afternoon trade, Bharti was trading at Rs 825.90, down 1.99 per cent on the Bombay Stock Exchange.
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