MTN shareholders want more from Bharti deal

MTN Group Ltd shareholders said they want more for their stakes in Africa’s biggest wireless company after it reached a $24-billion share-purchase accord with Bharti Airtel Ltd, the first step in their planned merger.

Bharti, India’s biggest mobile phone operator, sweetened its bid to buy 49 per cent of MTN by raising the cash portion of its $14 billion offer, three people familiar with the matter said. MTN’s minority shareholders will be able to opt for an all-cash payment, the people said, asking not to be named before an announcement this month. MTN and its shareholders are set to buy 33 per cent of Bharti for about $10 billion, they said.

“We wanted all cash and we wanted a higher price,” said Pallavi Ambekar, a Cape Town-based analyst with Coronation Asset Management Ltd, which holds about 5 per cent of MTN. “An all-cash offer is great, but it doesn’t address the price issue.”

Shareholder objection may block the world’s biggest cross-border deal this year. The transaction is aimed at creating 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 said Bharti should raise its offer from a bid disclosed in May.

As part of the deal, Bharti is offering $4 billion in stock and $10 billion in cash to MTN shareholders, the people said. MTN minority shareholders would have the option of a stock-and-cash or an all-cash payment, they said. Two of MTN’s biggest shareholders, M1 Group and South Africa’s Public Investment Corp, would take an all-stock payment, if necessary. M1 and PIC, the South African government pension fund administrator, collectively own about 35 per cent of MTN. Bharti and MTN have agreed in principle on the commercial terms and a final accord depends on regulatory and board approvals, the people said.

Marina Bidoli, a spokeswoman at Johannesburg-based MTN, declined to comment on the new preliminary agreement as did Ranjana Smetacek, a Bharti spokeswoman. In an e-mailed statement yesterday, Bharti said the two companies haven’t reached an agreement and that discussions with MTN are continuing.

MTN rose as much as 1.5 per cent in Johannesburg trading, and was 0.6 per cent higher to 127.75 rand at 10:54 am. Bharti rose 2.8 per cent to Rs 420.6 as of 10:24 am in Mumbai trading, extending its gain this year to 18 per cent.

Bharti on May 25 offered 86 rand in cash plus half a Bharti stock for each MTN share for a 49 per cent stake, while MTN 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.