Bharti and MTN are in serious negotiations for a possible $20 billion dollars merger. A year ago both companies cancelled their attempted merger after the political sensitivies arising in South Africa, the home country of MTN. This time both companies are negotiating a complex deal in which Bharti would get 49% shareholding in MTN while MTN will get 36% shareholding in Bharti. The complete merger will be done in the second stage. The resulting company would be the world third biggest telecom operator since China Mobile and Vodaphone are the first two operators on the list.
Sunil Bharti Mittal, Chairman and Managing Director of Bharti, said “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders. This opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation.”
According to a press release by Bharti, the discussion would revolve around the following principle elements:
- MTN would acquire approximately a 25% post-transaction economic interest in Bharti for an effective consideration of approximately USD 2.9 billion in cash and newly issued shares of MTN equal to approximately 25% of the currently issued share capital of MTN.
- Bharti would acquire approximately 36% of the currently issued share capital of MTN from MTN shareholders for a consideration comprising ZAR 86.00 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts (“GDRs”) for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTN’s acquisition of approximately a 25% post-transaction economic interest in Bharti, would take Bharti’s stake to 49% of the enlarged capital of MTN. Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by JSE Limited, South Africa.
- Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN
- MTN’s economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board
The transaction, if completed, would give a much needed boost to Bharti, whose home country India will soon reach its maturity. The possible Merger would also give access to Bharti in markets like Iran and Africa, where there is immense potential for growth.
[via Bharti airtel Press Release]
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