Bharti-MTN deal failed :: The Inside Story
According to the sources, the fate of the unsuccessful Bharti-MTN deal was sealed by the South African government?s treasury as much as three weeks back. The treasury wrote to MTN Phuthuma Nhleko on September 11 insisting that for the deal to go through, the potential merged company should remain domiciled in South Africa and should be listed in both companies, something that was not a possibility under existing Indian laws.
MTN, South Africa?s largest telecom company, and India?s Bharti were exploring a deal that could lead to a merger between the two companies resulting in a USD 23 billion entity. This was the second failed attempt between the two companies to strike a deal. Earlier in May 2008, the two companies had initiated talks to explore the possibility of a similar deal.
The South African government?s pension fund, Public Investment Corp, holds 21% stake in MTN and the government was under intense pressure to not give a go-ahead to the deal on concerns that MTN?s South African identity, post the deal, would be lost. Members of the treasury had, in fact, travelled to India on September 24 to understand the regulatory and legal framework of Indian laws and deliberate upon hurdles to the deal.
Sources say the treasury had raised the dual listing issue as early as mid August and had made it clear that it would be a no-deal in case India declined the request for an okay to the dual listing structure.
Why India said no to dual listing?
A dual listing structure would have rendered India?s foreign direct investment policy ?infructuous? and would have led to huge tax losses to the government, sources said.
Sources said a dual listed company (DLC) would have weakened the oversight of market regulator Securities and Exchange Board of India (SEBI) as it would not be able to monitor overseas stock exchanges ? MTN is currently listed on the Johannesburg Securities Exchange (JSE).
Not only would have a potential deal carried out under the DLC structure led to an export of capital market, it also had risks of multi-currency settlement infrastructure, sources said.
Source: Moneycontrol.com
MTN, South Africa?s largest telecom company, and India?s Bharti were exploring a deal that could lead to a merger between the two companies resulting in a USD 23 billion entity. This was the second failed attempt between the two companies to strike a deal. Earlier in May 2008, the two companies had initiated talks to explore the possibility of a similar deal.
The South African government?s pension fund, Public Investment Corp, holds 21% stake in MTN and the government was under intense pressure to not give a go-ahead to the deal on concerns that MTN?s South African identity, post the deal, would be lost. Members of the treasury had, in fact, travelled to India on September 24 to understand the regulatory and legal framework of Indian laws and deliberate upon hurdles to the deal.
Sources say the treasury had raised the dual listing issue as early as mid August and had made it clear that it would be a no-deal in case India declined the request for an okay to the dual listing structure.
Why India said no to dual listing?
A dual listing structure would have rendered India?s foreign direct investment policy ?infructuous? and would have led to huge tax losses to the government, sources said.
Sources said a dual listed company (DLC) would have weakened the oversight of market regulator Securities and Exchange Board of India (SEBI) as it would not be able to monitor overseas stock exchanges ? MTN is currently listed on the Johannesburg Securities Exchange (JSE).
Not only would have a potential deal carried out under the DLC structure led to an export of capital market, it also had risks of multi-currency settlement infrastructure, sources said.
Source: Moneycontrol.com
Labels: Mergers and Acquisitions
posted by Amandeep Singh at
1.10.09
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