Bharti set to sweeten MTN deal with extra $10 million

Written by fe Bureaus | New Delhi | Updated: Aug 29 2009, 04:21am hrs
Keen to seal the $23-billion deal with South African telecom major MTN, Bharti Airtel has reportedly agreed to a small sweetener in its offer to MTN. As per reports, it has agreed to offer MTN shareholders roughly $13.1 billion in cash, while the remaining amount would be in the form of shares. Earlier, Bharti was offering $13 billion in cash.

Sources said theres not much scope for any further offers, as the South African rand has appreciated against the dollar. A Bharti spokesperson declined to comment on the matter.

For the Bharti-MTN deal to finally go through, shareholders holding a combined 75% in MTN must approve the deal. However, in South Africa, while declaring the companys half-yearly results, the MTN CEO said, No decision has been taken or agreement reached by either company's board to implement any potential transaction or stake sale with Bharti. The MTN statement, however, added, The rationale for the transaction was compelling and included diversification and synergy benefits.

The announcement comes barely four days after MTN president and CEO Phuthuma Nhleko and Bharti Airtel chairman Sunil Mittal met finance minister Pranab Mukherjee to apprise him of the ongoing negotiations between the two companies. Mukherjee told FE on Wednesday that there were no regulatory hurdles for the proposal.

The two chiefs are also believed to have discussed the complex structure of the deal and that if the deal materialises, it would be in accordance with the new FDI norms.

Bharti's additional offer is an effort to placate MTN investors, who were unsatisfied with the deal. South Africa's Public Investment Corporation (PIC), a shareholder, has in the past indicated it might hold out for a higher price, as it felt Bharti needed to pay a bigger premium for effective control of MTN.

The two companies have been in negotiation for creating a $20-billion entity, wherein Bharti Airtel would acquire a 49% stake in MTN while swapping its 36% stake.

Coming to the companys results for the six months ended June 30, MTN clocked a 24.2% increase in revenue at $7.28 billion as compared to the same period a year ago. The company's subscriber base climbed 14% to touch 103.2 million from December.

Since May 15, the rand has risen 9.2% against the US dollar, recently trading at 7.86 rand per dollar. The transaction will be done in US dollars.

At current prices, Bharti would pay around $7.4 billion in cash. MTN shareholders will also receive Bharti global depositary receipts -- 1 GDR per two MTN shares -- that are worth about $5.7 billion in total. Bharti has lined up about $4 billion in loans from eight banks to help finance the deal.

So far, Lebanon's Mikati family, which owns 10% of MTN, has announced it backs the deal.

Meanwhile, SingTel, which owns around 30% stake in Bharti, is reportedly considering buying Bharti GDRs from MTN shareholders in order to keep its position in the Indian company close to its current level. Earlier, analysts had estimated that SingTel's stake would be reduced to about 19.4% based on the terms disclosed so far. The two companies recently extended their exclusive talks to September 30.