Bharti, MTN reach preliminary accord

The Indian operator has reportedly sweetened its bid by raising the cash portion of its $14-bn offer.

Bharti Airtel Ltd, India’s biggest mobile phone company, and South Africa’s MTN Group Ltd reached a $24-billion preliminary agreement to buy each other’s shares, the first step in a planned merger, three people familiar with the matter said.

Bharti sweetened its bid to buy 49 per cent of MTN by raising the cash portion of its $14 billion offer, the people said, asking not to be identified before an announcement this month. MTN, Africa’s biggest wireless company, and its shareholders are poised to acquire 33 per cent of Bharti for about $10 billion, they said.
 

DIALLING A DEAL

* Bharti said on May 25 it offered 86 rand in cash plus half a Bharti stock for each MTN share for a 49% stake, while MTN and its shareholders would acquire 36% of Bharti

* Bharti said at the time the value of the deal may exceed $23 billion

* Shareholders of about 20% of MTN have said they didn't support the deal at Bharti's initial bid. Some demanded an all-cash offer

The world’s biggest cross-border deal this year would pave the way for the creation of a mobile-phone carrier with annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai. The accord would need the approval of 75 per cent of MTN’s shareholders, some of whom have said Bharti should raise its offer from a bid disclosed in May.

Singapore Telecommunications Ltd, which owns about 30 per cent of Bharti, agreed to invest as much as $3 billion to buy Bharti shares, according to the people.

SingTel said in an e-mail that the company doesn’t comment on “market speculation.” Marina Bidoli, a spokeswoman at Johannesburg-based MTN, declined to comment as did Ranjana Smetacek, a Bharti spokeswoman. In an e-mailed statement today, Bharti said discussions with MTN are continuing.

Bharti agreed to give $4 billion in stock to two of MTN’s biggest shareholders, M1 Group and South Africa’s Public Investment Corp, while offering remaining shareholders $10 billion in cash, the people said.

Bharti said on May 25 it offered 86 rand in cash plus half a Bharti stock for each MTN share, for a 49 per cent stake, while Africa’s largest mobile-phone company and its shareholders would acquire 36 per cent of the New Delhi-based operator. Bharti said at the time the value of the deal may exceed $23 billion.

Shareholders of about 20 per cent of MTN have said they didn’t support the deal at Bharti’s initial bid. Some demanded an all-cash offer.

An increase in the cash component and the all-cash option for MTN minorities is “a better offer, but for my part is not good enough,” said Martin Mabbutt, a London-based analyst at Nomura International, which owns some MTN shares. “I feel MTN could get a much higher price.” He rates the stock a “buy.”

Coronation Fund Managers Ltd, which holds about 5 per cent of MTN, said on August 20 it wanted about 31 per cent more for its stake in Africa’s largest wireless provider. The fund also wanted an all-cash offer, instead of Bharti’s proposed stock- and-cash bid, it said then.