MTN exempted from Sebi rule

Regulator excuses company from making open offer after Airtel deal

  
Under the Sebi’s current takeover regulations, any investor acquiring over 15 per cent stake in a company should make an open offer for an additional 20 per cent, but the market regulator in a notification has given an exemption and clarified that the proposed deal structure does not require an open offer as MTN’s shareholding in Bharti will be only through GDRs.

Further, Sebi has made it clear that the open offer will only trigger when the GDRs are converted to local shares with voting rights.  The proposed $23-billion transaction between Airtel and MTN envisages a complex structure in which both entities would pay cash and equity for stakes in each other. And this formula, if it works out, would result in Bharti getting a 49 per cent stake in MTN and the latter in turn would covet a 36 pc “economic interest” in the former.

Bharti Airtel had approached Sebi to grant an exemption to   firm from making an open offer in India following the deal.  However, Sebi did not exempt the company from making the disclosures under the Sebi Regulations and the requirements contained therein will have to be complied with. As per Bharti’s earlier disclosures,  Bharti Airtel’s equity expansion will only be in the form of GDRs that will be listed on the Johannesburg Stock Exchange meaning MTN’s entire 36 per cent holding will be in the form of GDRs.

Both firms are in exclusive talks to create a $23 b merger in a cash and stock transaction.  The deal involves issuance of GDRs by Bharti to MTN and its shareholders for the 49 per cent stake which if exchanged for underlying shares would form about 25 per cent of the share capital of Bharti.