Reliance Communication sets sights on 40% in MTN
Anil Ambani, chairman of Reliance Communications is considering buying over 40 per cent of MTN.
Ambani is looking at how he could maximise an in-effect controlling position in MTN by seeking to persuade the African mobile operator’s shareholders to waive their right to tender offer.
It has been thought he would limit himself to a 34.9 per cent stake in MTN, because if he went any higher he would be obliged under South African laws to make an offer to buy out the company’s other shareholders.
People close to the talks said Ambani was looking at the case for a “whitewash” procedure under which MTN’s shareholders would vote on whether to waive their right to a tender offer. If the shareholders agreed, Ambani could end up owning 40-45 per cent in MTN.
On May 26, Reliance and MTN began 45 days of exclusive talks on a possible merger that would create a telecoms powerhouse in emerging markets. Several transaction structures have been examined and no conclusions reached.
Ambani is seeking to engineer a de facto takeover of MTN under which he would swap most of his 66 per cent shareholding in Reliance for a near-controlling stake in the enlarged group. Reliance would become a subsidiary of MTN.
The talks are politically sensitive as MTN is one of South Africa’s most successful post-apartheid companies. Any deal with Reliance would almost certainly be presented as a merger.
They have also been complicated by the threat of legal action by Mukesh Ambani, Anil’s brother, who is claiming a right of first refusal over any stake sale by Reliance.
Reliance’s shares closed down 1.5 per cent at Rs 534.85 last night, giving it a market capitalisation of $26.1 billion. MTN’s shares were up 1.6 per cent at Rand 38.95 (Rs 206.49), resulting in a capitalisation of $32 billion.
MTN’s largest shareholders are Newshelf, a company that holds 13 per cent on behalf of the group’s staff, and Public Investment Corporation, a South African state-owned pension fund, which also has 13 per cent
