Bharti-MTN deal doesn’t need open offer

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New Delhi: Stock market regulator Securities & Exchange Board of India has clarified that the proposed share-swap deal between Bharti Airtel and South Africa’s MTN for $23 billion will not require an open offer.

Sebi’s statement paves the way for a smooth deal between the two companies, which would create a $20-billion entity, having a footprint in over 24 countries and over 200 million subscribers. The regulators clarification comes three weeks before the expiry of the exclusivity period for Bharti Airtel and MTN for the cash-cum-stock swap deal that would allow the South African telecom major to acquire 36% in Bharti.

Sebi’s communication was in reply to a Bharti query whether the deal triggers a mandatory 20% open offer under takeover norms.

Sebi has said that since the acquisition is made through global depository receipts (GDRs), an open offer is not required. However, were the GDRs to be converted into local equity shares with voting rights, then the open offer would come into play.

As per takeover norms, any acquisition beyond 15% makes it mandatory on companies to come with an open offer for additional 20%.

Bharti and MTN are negotiating a complex deal whereby Bharti would own 49% stake in the South African company. In exchange, MTN and its shareholders, would have 36% in Bharti.

However, Bharti has earlier said that MTN would get representation on its board in line with its stake. A corporate lawyer told FE that MTN directors would have the voting and veto rights in their capacity as lenders (through GDR) and not as equity shareholders. However, MTN shareholders would hold no voting rights but their interests would be served through their representatives on the board.

In a statement on June 22, Bharti had said, “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 for every MTN share acquired.”