Bharti Airtel, SingTel to float SPV for MTN buy

Billionaire Sunil Mittal, the founder of Bharti Airtel, plans to set up a separate company in partnership with Singapore Telecommunications (SingTel) that will be the vehicle for acquisition of the South Africa-based MTN Group, according to sources close to the deal.

The special purpose vehicle (SPV) will raise funds, including bridge loans. The company will later explore the option of selling American depository receipts (ADRs) or global depository receipts (GDRs) to repay the bridge loan, the sources said.

Indian firms, including Tata Steel, in the past have formed SPVs to acquire foreign companies to protect local operations and also to avoid legal hindrances. The SPV may be registered in a tax-haven country, like Mauritius or Bahamas, the sources said.

The move to float an SPV will help Bharti Airtel to continue being listed on Indian stock exchanges, while MTN's promoters will be given a stake in the SPV. The quantum of the stake will depend on the cash-share ratio, which is yet to be finalised between Bharti and MTN. Bharti Airtel would raise funds by diluting the equity of the SPV and, if needed, the promoters' stake in Bharti and that of its partner SingTel to part-finance the deal.

Airtel may have to go for an open offer