Bharti, MTN revive merger talks

25 May 2009

Bharti Airtel Limited has revived talks with the MTN Group Limited to acquire a 49 per cent sake in the South African telecom company, in a potential transaction whereby MTN and its shareholders would in turn acquire about 36 per cent stake in Bharti Airtel.

MTN would directly hold 25 per cent of the 36 per cent and the remainder by MTN shareholders, Bharti said, adding, the potential value of the cash and stock deal would be over $23 billion.

A merger of MTN, with a current market cap of $27 billion, and Bharti, valued at $34 billion, would create one of the top 10 global telecom players. This would be the largest overseas deal for an Indian company and the world's largest cross-border deal in the non-pharma sector.

According to the scheme of arrangement being discussed, MTN would acquire approximately a 25 per cent stake in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25 per cent of the currently issued share capital of MTN.

Bharti would acquire about 36 per cent of the newly issued share capital of MTN from MTN shareholders for a consideration comprising South African Rand 86.00 ($10.32) in cash and one half of newly issued Bharti shares in the form of global depository receipts (GDRs) for every MTN share acquired. This  combined with MTN shares issued in part settlement of MTN's acquisition of approximately a 25 per cent post-transaction economic interest in Bharti, would take Bharti's stake in the enlarged capital of MTN to 49 per cent.

Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by Johannesburg Stock Exchange Limited, South Africa.