"Anil Ambani meets Azmi Mikati to talk likely reverse merger "

12-Member RCom Team To Go To Johannesburg To Examine MTN Books; Lehman Joins RCom Squad

Kausik Datta MUMBAI


ANIL Ambani, whose Reliance Communications (RCom) is in talks with South African telco MTN for a possible reverse merger, met Azmi Mikati in London on Wednesday. The Mikati family’s investment arm M1 is the second largest shareholder in the foreign company with a 10.2% stake. Newshelf 664 is the largest shareholder with nearly 3% more than the Mikatis. A reverse merger is the acquisition of a public company by a private company, simply put.

This was Mr Ambani’s first meeting with Mr Mikati after the two companies announced last week that they “were in talks.” If successful, it would create a telecom colossus with subscribers in 25 countries. They had met once at a global investors’ summit but had never discussed a deal, said sources. At a two-and-a-half-hour meeting, Mr Mikati is believed to have expressed his support to the reverse merger of RCom with MTN. The meeting took place at Four Seasons Hotel in London.

Last week, Mr Ambani had met Phuthuma Nhelko, CEO of MTN and a beneficiary of Newshelf 664. Sources said that both have agreed to the broad contours of the deal, which suggest that Mr Ambani will emerge as the single largest shareholder of MTN with almost one-third stake while his RCom will be a subsidiary of MTN. They have also discussed the management structure of the combined entity, post the deal.

Now, with Mr Mikati favouring the deal, the finalisation of the complex transaction, which needs regulatory approval from several authorities in a handful of countries, hinges on the pricing.

Both the parties are learnt to have asked for ‘control premium.’ RCom is asking for control premium as it will eventually become a subsidiary of MTN while the foreign company’s demand for it is based on the argument that it will cede control to Mr Ambani.

Meanwhile, more advisors are joining the RCom team, the latest addition is believed to be Lehman Brothers. RCom’s advisory team is led by Ken Costa, a veteran investment banker and chairman of Lazard in the UK. Mr Costa is a legend of sorts in his field. MTN is being advised by Merrill Lynch and Deutsche Bank.

RCom is sending a 12-member team to MTN’s headquarters in Johannesburg to examine the company’s books. The team comprising three presidents namely S P Shukla, Prakash Bajpai and Punit Garg, and officials of the legal, accounts and tower business, will leave Mumbai on Thursday. They are expected to finish the first round of due diligence, as the exercise is called in business parlance, by June 9. A team from MTN is expected to visit Mumbai once the RCom representatives are back.

A foreign news agency said Mr Ambani may invite global private equity investors to join him in his bid to conclude a deal with MTN. Although there is no significant money transaction involved in the deal as he is expected to swap his RCom shares to get MTN shares, he may be benefited from the vast experience of the PE investors if he takes them on board.

If a deal as discussed by both the parties happen, MTN will launch a 20% open offer for RCom shareholders. Mr Ambani may also provide an option to his minority shareholders of swapping their shares to get MTN shares.

"Yahoo hung up on Google deal before MS’ hostile bid"

Co To Focus On Long-Term Value Creation Instead Of Short-Term Gains
Reuters SAN FRANCISCO


YAHOO executives dismissed a searchadvertising deal with Google due to antitrust concerns, one day before Microsoft made its take-over offer earlier this year, according to court documents made public on Monday.

The position came to light in a complaint filed by attorneys representing two Michigan pension funds in a shareholder lawsuit that aims to revoke yahoo take-over defences and press the company to renew merger talks with Microsoft.

“We are focused on long-term value creation rather than short-term gains,” said a Yahoo document prepared for Yahoo executives ahead of an ‘all hands’ internal meeting on January 30 — the day before Microsoft made its merger offer.

Bracing for employee questions over whether Yahoo should outsource its searchad sales to Google, executives were prepared to argue that any short-term gains would derail Yahoo’s long-term push to become a “must buy” for advertisers.

“Short-term analysis of the revenue potential of outsourcing magnetisation may not take into account the longer term impact on the competitive market if search becomes an effective monopoly,” an excerpt from the company document said. Magnetisation refers to sales of search-related ads.

These comments appear to contrast with Yahoo’s subsequent position when it announced on April 9 that it was conducting a test with rival Google, the market leader in Web search and related advertising, to rely on Google to sell its search ads.

The turnabout was part of a strategy by Yahoo management to seek alternatives for its business instead of settling for Microsoft’s cash-and-stock offer at $31 per share, which the company’s board had rejected as undervaluing Yahoo’s assets.

Microsoft challenged the possible Google-Yahoo tie-up as anti-competitive, citing Google’s growing dominance of the Web search business and its even larger share of ad sales tied to Web search results. Government regulators also rushed to say they would investigate any Google-Yahoo partnership.

Web search is increasingly strategic as most people find information on the Internet via such systems. Search-based advertising, because of its high degree of targeting, has become a great money spinner for Google.

Yahoo has acknowledged that a gap exists between what it makes running its own advertising alongside its search results and the improved payback it could see by using Google’s ad-sales systems in conjunction with Yahoo’s search operation.

“We, in fact, have some understanding of what they (Google) could do for us and what we could do for them,” Yahoo chief executive Jerry Yang told a conference last week.

A Delaware Chancery Court judge ruled on Monday that excerpts from confidential Yahoo company documents could be made public in the investor suit after initially sealing some of the information in a filing made last month.

A Yahoo statement said the company was disappointed at the judge’s ruling to unseal Yahoo internal documents but said it would have little bearing on the outcome of the case. A company spokeswoman would not comment on papers revealed in the case.
STORY BOARD

STING IN TALE

Microsoft challenged the possible Google-Yahoo tie-up as anti-competitive, citing Google’s growing dominance of the web search business and its even larger share of ad sales tied to web search results

AD BLITZ

Yahoo has acknowledged that a gap exists between what it makes running its own advertising search and the improved payback it could see by using Google’s ad-sales systems in conjunction with Yahoo’s search operation

"CALLING SHOTS MERGER OPTIONS"

1 Modis sell 40% in Spice directly to Idea before merger. TM, which holds 39%, gets a stake in Idea post-merger

2 TM first buys Modis’ stake in Spice and co merges with Idea later. Even then, TM becomes a shareholder in Idea

Why Idea may want to buy

Strong foothold in Punjab and Karnataka circles, which boast of high average revenue per user
Merged entity will become fifth-largest telco in terms of mobile subscribers (28.5 m)
Idea set to become pan-India operator by 2009

Why Modis may want to sell

Spice’s inability to expand & become pan-India player
DoT had rejected pan-India licences for Spice citing poor net worth
Spice’s expansion plans yet to be finalised
TM known to share frosty relationship with Modis