Bharti Airtel is exploring a potential transaction to acquire 49% stake in South African telecom company MTN Group Limited. As per this scheme, MTN will get 25% stake, while shareholders of MTN will get 11% stake in Bharti Airtel. Thus while MTN and its shareholders will have 36% stake in Bharti, the stake of Bharti Airtel in MTN would be about 49%.
MTN will pay about US$ 2.9 billion in cash and also issue shares equivalent to 25% of its current equity to Bharti, which will also be about 20% of the expanded equity of MTN. For this, Bharti would issue shares equivalent to 25% of its expanded equity.
Bharti would acquire about 36% of the currently issued share capital of MTN from MTN shareholders for a consideration comprising of ZAR 86.00 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts for every MTN shares. This 36% stake in the current equity will be about 28.8% stake in the expanded equity. So, after purchase of 36% current equity from MTN shareholders and after allotment of 25% of the current equity in MTN, Bharti will have (61% of the current equity) about 49% stakes in the expanded equity of MTN.
Bharti would have substantial participatory and governance rights in MTN and MTN will also have appropriate representation on the Bharti Board. So, Bharti will consolidate MTN’s operations in its financials, and MTN will also consolidate Bharti’s operations in its financials.
The idea would be to achieve full merger of MTN and Bharti as soon as it is practicable, in order to create a leading emerging market telecom operator. The combined entity’s turnover could be over US$ 20 billion while their customer base would be over 200 million. Bharti would be the primary vehicle for further expansion in India and (rest of) Asia while MTN would be the primary vehicle for further expansion in Africa and Middle East.
Bharti cautioned that the discussions are at an early stage and it may or may not lead to any transaction. Further it also said that the structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties and discussions with lending banks and regulators.