The deadline for exclusive merger talks between MTN and India's Bharti Airtel expires today, having been extended twice. It's reported that a deal will be announced, but so far no new details have emerged.
The companies first started talking about a merger last year, but a deal wasn't concluded then.
They began negotiations again in June, and have twice extended the deadline for exclusivity, with today (30 September) being the latest deadline.
The envisaged merger would look to create a single, $20-billion emerging market telecommunications operator serving 200-million customers.
The two companies are exploring a potential transaction whereby MTN and its shareholders would acquire, pursuant to a scheme of arrangement, an approximate 36% aconomic interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders. At the same time, Bharti would acquire an approximate 49% shareholding in MTN.
The potential transaction would create a leading telecommunication service provider group aligning Bharti's Indian business with MTN's African and Middle Eastern operations. It would also represent a significant development in South-South cooperation between India and South Africa.
The discussions contemplate that the potential transaction, which would be achieved through a scheme of arrangement, would include the following principal elements:
* MTN would acquire approximately a 25% post-transaction economic interest in Bharti for an effective consideration of approximately $2,9-billion in cash and newly-issued shares of MTN equal to approximately 25% of the currently issued share capital of MTN.
* Bharti would acquire approximately 36% of the currently issued share capital of MTN from MTN shareholders for a consideration of R86.00 in cash and 0.5 newly-issued Bharti shares in the form of Global Depository Receipts ("GDRs") for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTN`s acquisition of approximately a 25% post-transaction economic interest in Bharti, would take Bharti`s stake to 49% of the enlarged capital of MTN. Each GDR would be equivalent to one share in Bharti and would be listed on the JSE securities exchange;
* Bharti would have substantial participatory and governance rights in MTN, enabling it to fully consolidate the accounts of MTN; and
* MTN's economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board.
The potential transaction, when completed, would be expected to create value for MTN shareholders due to, among others, synergistic benefits and a further diversification of MTN's income streams into the fast growing and relatively under-penetrated Indian market.
The potential transaction is also expected to create value for Bharti shareholders, including going forward MTN and MTN shareholders due to, among others, synergistic benefits and further diversification of Bharti income streams into the fast growing and relatively under-penetrated African and Middle Eastern markets.
MTN would continue to be listed on the JSE securities exchange and would be the primary vehicle for both Bharti and MTN to pursue further expansion across Africa and the Middle East while Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia.
The implementation of the potential transaction would not result in any job losses in South Africa, and MTN remains committed to implementing its proposed BEE deal.
MTN would also have certain rights to increase its economic interest in Bharti in the future, with the broader strategic objective being to achieve a full merger of MTN and Bharti as soon as it is practicable. This would create a leading emerging market telecom operator which today would have combined revenue of over $20-billion and a combined customer base of over 200-million.