Bharti reaches share purchase accord with MTN

Shareholder objection may block deal

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.

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. 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.

Commercial terms

Bharti and MTN have agreed in-principle on the commercial terms and a final accord depends on regulatory and board approvals, the people said. Both MTN and Bharti officials refused to confirm the deal.

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

“Relative to the proposed transaction, I believe a full- cash option will add value and I do think it will make minorities look at the deal differently,” Jan Meintjes, a fund manager with Gryphon Asset Management, which holds MTN shares and has about 2.5 billion rand ($330 million) under management, said in a phone interview from Cape Town on Thursday.

The May offer implied a take-out price of 137 rand a share, compared with the new offer’s 145 rand, Coronation’s Ambekar said. Her fund, which has about 150 billion rand under management, wants 180 rand a share, she said.

For Bharti Chairman Sunil Mittal, who wants the merger to boost sales overseas as revenue growth slows at home, this is the second attempt in as many years to seal a deal with MTN. Talks failed last year on differences over control.

Plans ahead

Bharti and MTN plan to spend about $ 7 billion this year to extend their reach in markets from the Cape of Good Hope to the Himalayas, covering territories that gave London-based Vodafone Group Plc almost 90 per cent of its new users in the quarter ended March 31.

The combined entity will help Bharti boost overseas sales as Reliance and Vodafone close in on its lead in India.

Agencies