Bharti Airtel Announces Potential Share Exchange with MTN
IT News Online Staff
2009-05-26
Bharti Airtel Ltd. announced that it is exploring a potential transaction with MTN Group Ltd. whereby, pursuant to a scheme of arrangement, Bharti would acquire a 49% shareholding in MTN and, in turn, MTN and its shareholders would acquire an approximate 36% economic interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until July 31, 2009.
The potential transaction between Bharti and MTN would create a leading telecom service provider group aligning Bharti's Indian business with MTN's African and Middle Eastern operations. The broader objective would be to achieve a full merger of MTN and Bharti as soon as it is practicable to create a leading emerging market telecom operator, which today would have combined revenues of over $20 billion and a combined customer base of over 200 million.
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."
The discussions contemplate that the potential transaction, which would be achieved through a scheme of arrangement, would include the following principal elements:
- MTN would acquire around a 25% post-transaction economic interest in Bharti for an effective consideration of around $2.9 billion in cash and newly issued shares of MTN equal to around 25% of the currently issued share capital of MTN.
- Bharti would acquire around 36% of the currently issued share capital of MTN from MTN shareholders for a consideration comprising ZAR 86 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 around 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 Ltd., South Africa.
Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN, while MTN's economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board.
Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.
The potential transaction, when completed, would be expected to create value for Bharti shareholders due to, among others, synergistic benefits and further diversification of Bharti income streams into the fast growing and relatively under-penetrated African and Middle Eastern markets. This potential transaction would combine the strengths of two leading emerging market telecom operators to create a leading telecom group serving the large populations of Asia, Middle East and Africa. The potential transaction will represent a significant development in South-South cooperation between India and South Africa. Additionally, along with Bharti's partner, Singapore Telecommunications, and its Bridge Alliance the combined networks will cover a geography spanning Africa to Australasia.
Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East.
The discussions are at an early stage and may or may not lead to any transaction. The structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties and discussions with lending banks and applicable regulators. No decisions or agreement to acquire any shares or implement the transactions outlined above have been made by the Boards of either MTN or Bharti.
Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd. are the financial advisers and AZB & Partners and Bowman Gilfillan are the legal advisers to Bharti.
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