The suspense over a potential deal between India’s leading telecom operator Bharti Airtel and South Africa’s MTN continues. Even as the exclusive negotiation period ended on July 31, the two telcos had remained silent on the status of the deal until Monday morning when they announced that the dialogue would continue for another month.
Bharti and MTN would now talk some more till August 31, which may or may not result in a deal.The transaction, if completed, could result in a potential cross-shareholding deal worth over $23 billion.
As per the initial statements of the two companies, Bharti would acquire 49% shareholding in MTN. Also, MTN and its shareholders would get around 36% economic interest in Bharti, of which 25% would be held by MTN and the remainder by its shareholders.
Both sides would pay in cash as well as shares. Sources in the industry told this newspaper that extension of the exclusive negotiation period was not an indicator of a deal gone bad.
Rather, it was quite normal for issues to crop up during talks in a complex deal like this one. Both parties see room for settling issues and therefore the negotiation period has been extended, sources pointed out.
A senior industry source told this newspaper that management issues may have come up during the discussion, resulting in the extension of talks.“Management issues are almost always the most tricky in M&A deals,” the source added. While both the sides are looking for complete merger, one is not certain yet on who’ll be in charge of the new entity.
Another uncertainty right now is about the post-deal status of Bharti’s current foreign partner SingTel, which holds over 15% in Bharti Airtel and a total of 30% in the Bharti group.
Also, reports pointed at issues over listing of the merged entity, for which the telcos are believed to have spoken to the stock market regulator, Sebi. “It’s a complex deal, so it’s taking time,” an investment banker said replying to a DNA Money query. Otherwise, the deal is going well, the banker said.
According to an industry insider, the essence of the deal is likely to remain the same, but there could be changes in its detailing. “It’s normal for new issues to come up as companies progress in talks to strike deals of this size,” he said.
When asked about the development, a top official of a telecom company operating in India said that “not much significance should be attached to the extension of talks. It’s a complex deal and it’s taking a bit longer than expected.”
It may be recalled that in 2008, Bharti and MTN had ended their negotiation after prolonged talks, and a year later they announced returning to the negotiation table to work on a restructured alliance.
In a statement issued on Monday morning, MTN said, “shareholders are advised that the discussions between the parties regarding a potential transaction are continuing and both parties have agreed to extend the exclusivity period until up to 31 August 2009.”
The MTN statement added, “no decision or agreement to acquire any shares or implement the potential transaction outlined above has yet been made by the boards of either MTN or Bharti and the discussions may or may not lead to any transaction and the structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties.”
It further said, “shareholders are therefore advised to continue to exercise caution when dealing in MTN’s securities until a further announcement is made.” Bharti also made a similar announcement. “As discussions between the parties regarding the potential transaction are continuing, both parties have agreed to extend the exclusivity period up to August 31, 2009.” Bharti also stated that no decision or agreement had been firmed up by the two boards to implement the transactions.The Indian telco clarified that the structure and terms of the potential transaction may be adjusted.
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