Bharti closer to $20-billion MTN deal as major shareholder Mikati expresses confidence
10 May 2008
Sunil ''Bharti'' Mittal's proposed deal with South African telecommunications company MTN can easily surpass the Tata Steel's Corus and Tata Motor's JLR (Jaguar & Land Rover) deals in sheer magnitude, as he moves closer to the $20-billion deal. (See: Bharti in talks for a controlling stake in South Africa's MTN)
The Bharti Airtel chairman cut short his London visit and returned on Friday, after ''advanced negotiations'' with Phuthuma Nhleko, the CEO of MTN. News from London indicated that Nhleko had placed some preconditions for a deal, one of them being that CEO and group president, Nhleko should be the chief executive of an integrated management committee, combining top executives of both the firms.
Mittal is said to be agreeable to this. Moreover, he would anyway need to abide by race laws that require a 25-per cent equity ownership and 40 per cent management control by blacks. (See: Bharti's proposed acquisition of MTN runs into pre-condition hurdle)
On the other side, former Lebanese prime minister Najeeb Mikati, estimated to have a personal fortune of $2.6 billion and the richest Lebanese, owns a 9.8-per cent stake in MTN through his London-based family-controlled investment arm MI, was quite welcoming of the proposed deal. Azim Mikati, Najeeb's son, was quite effusive in describing the proposed merger as a meeting of equals.
''I don't see the Bharti transaction as a sale. It is really combining two great assets in what could become a really unique player in the emerging market of the mobile industry,'' he told the media. He cited Bharti's exceptional record in India as one of the reasons for his support and said that his firm was fully supportive of the MTN management's decision-making.
Alpine Trust, a consortium jointly owned by the MTN management the MI Group, is the single largest shareholder with 23 per cent stake in MTN. The South Africa Government Pension Fund holds 13.5 per cent of the company.
Singapore-based SingTel, which directly and indirectly holds a 30.5-per cent in Bharti Airtel, is also expected to play a prominent role in the acquisition. It is expected to raise as much as $8 billion of the estimated $20 billion deal value by buying shares in the South African firm.
The remaining $12 billion will be raised through debt financing by Bharti, ther prospects of whivh have led rating agencies Fitch (See: Fitch watches Bharti's proposed acquisition of MTN) and Standard & Poor's put out a note saying that a forward progression of the deal could lead to a downward revision of the Indian telecom operator.