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Rumours confirmed as Indian giant in again for MTN
MTN CAUTIONARY ANNOUNCEMENT
MTN Group Limited (”MTN”) is pleased to announce that MTN and Bharti Airtel Limited (”Bharti”) are currently exploring a potential transaction whereby MTN and its shareholders would acquire, pursuant to a scheme of arrangement, an approximate 36% economic interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders, and Bharti would acquire an approximate 49% shareholding in MTN. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until 31 July, 2009.
The potential transaction between Bharti and MTN would create a leading telecommunication service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations. The potential transaction would also represent a significant development in South-South cooperation between India and South Africa.
Commenting, Phuthuma Nhleko, CEO of MTN said:
“The rationale for this potential transaction between MTN and Bharti is highly compelling. It addresses our strategic imperative of becoming one of the pre-eminent emerging market telecommunications companies with leading positions in three of the fastest growing wireless markets globally - India, Africa and the Middle East, with no overlapping footprint.”
“We are excited at the prospect of teaming up with Bharti, India’s number one wireless operator and one of the most strongly capitalised players amongst its emerging market peer group. This would create a highly visible commercial partnership between South Africa and India.”
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 USD 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 ZAR 86.00 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 securities exchange operated by JSE Limited
- Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN
- MTN’s economic interest in Bharti would be equity accounted and would have appropriate representatation 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 securities exchange operated by JSE Limited 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. MTN remains fully committed to implementing MTN’s proposed BEE deal, as set out in its announcements on SENS on 15 December 2008, 18 February 2009 and 27 March 2009. MTN would also have certain rights to increase its economic interest in Bharti in the future.
The broader strategic objective would be to achieve a full merger of MTN and Bharti, as soon as it is practicable to create a leading emerging market telecom operator which today would have combined revenue of over USD 20 billion and a combined customer base of over 200 million.
The discussions, which may have a material effect on the price of MTN’s securities if successfully concluded, are at an early stage and may or may not lead to any transaction. The structure and terms of the potential transaction may be adjusted to reflect, among others, further discussions between the parties and discussions with lending banks and applicable regulators. No decision or agreement to acquire any shares or implement the potential transaction outlined above has yet been made by the Boards of either MTN or Bharti.
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Media statement from Bharti Airtel Limited
New Delhi, May 25, 2009: Bharti Airtel Limited (”Bharti”) is pleased to announce that it has renewed its effort for a significant partnership with MTN Group Limited (”MTN”) and is exploring a potential transaction whereby, pursuant to a scheme of arrangement, Bharti would acquire a 49% shareholding in MTN and, in turn, MTN and its shareholders would acquire an approximate 36% economic interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until July 31, 2009.
The potential transaction between Bharti and MTN would create a leading telecommunications service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations. The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as it is practicable to create a leading emerging market telecom operator which today would have combined revenues of over USD 20 billion and a combined customer base of over 200 million.
Sunil Bharti Mittal, Chairman and Managing Director of Bharti, said “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders. This opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation.
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 USD 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 comprising ZAR 86.00 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 securities exchange operated by JSE Limited, South Africa.
Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN. MTN’s economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.
The potential transaction, when completed, would be expected to create value for Bharti 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. This potential transaction would combine the strengths of two leading emerging market telecom operators to create a leading telecom group serving the large populations of Asia, Middle East and Africa. The potential transaction will represent a significant development in South-South cooperation between India and South Africa. Additionally, along with Bharti’s partner, Singapore Telecommunications, and its Bridge Alliance the combined networks will cover a geography spanning Africa to Australasia.
Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East.
The discussions are at an early stage and may or may not lead to any transaction. The structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties and discussions with lending banks and applicable regulators. No decisions or agreement to acquire any shares or implement the transactions outlined above have been made by the Boards of either MTN or Bharti.
Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd are the financial advisers and AZB & Partners and Bowman Gilfillan are the legal advisers to Bharti.
About Bharti Airtel Limited
Bharti Airtel Limited, a group company of Bharti Enterprises, is Asia’s leading integrated telecom services provider with operations in India and Sri Lanka, with an aggregate of 100 million customers. Bharti has been voted as India’s most innovative company, in a survey conducted by The Wall Street Journal.
For more information, visit http://www.airtel.in/
