After more than a year of on-and-off negotiations, India’s Bharti Airtel and South Africa’s MTN Group appear to be close to striking a deal that could lead to a tie. Bharti Airtel shares jumped as much as per cent on Thursday on news that it had called off merger talks with MTN after the two companies. The SOUTH AFRICAN government said that it supported the proposal merger of Bharti-Airtel and the MTN group in principle. The Indian Government agreed.
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MTN deal off, what next for Bharti?
Drag according to your convenience. This deal structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form. Thereafter, the MTN board met and formally called off meregr deal.
Such arrangements are also seen protecting the national identities of companies. ET was the first paper to flag off the issue of dual listing as a major stumbling block for the deal in its edition dated July 31, Bharti has not given up yet In the end, the politics of national pride derailed the deal as South Africa did not want MTN to lose its independent identity. It wanted an assurance from the Indian government that it would amend laws to allow DLCs.
This also marks the seventh attempt by MTN to enter into a merger or strategic alliance with global communication majors. The South African giant has in the past been in failed discussions with the likes of Vodafone, China Mobile and Reliance Communications.
We felt that the deal in its initial format was quite complicated and felt that the price being offered undervalued MTN itself. The deal was complicated.
Naturally, friends and well-wishers of Sunil Mittal are disappointed. He will go for something bigger than MTN. Ironically, the transaction under discussion did not involve any loss of national identity for MTN.
But the South Africans wanted assurances for the future, which the Indian government was not in a position to give as it said that allowing dual listing will need major amendments to key corporate laws and cannot be done in haste. This was the case with the proposed MTN-Bharti merger, which required certain exchange control and other approvals. But the Indian company has not totally given up, if its statement has is anything to go by. This is our second attempt at forging a deep and meaningful alliance with MTN.
It is a very well considered move and there is a very strong bharri.
The Bharti Group head had met the prime minister three times and held discussions with with finance minister Pranab Mukherjee as well as top government officials in a number of ministries. Bharti also indicated its gratitude to the Indian government for its support: We express our profound gratitude to the annd prime minister of India for his strong support to what could have been a transformational partnership.
MTN deal off, what next for Bharti? – Livemint
We need to scale the Capital wall It was clear from the beginning that regulatory barriers would be the biggest obstacle in consummating the Bharti-MTN deal. Looking ahead, the Indian government needs to think about the changes in our capital account regime that will facilitate the large cross-border transactions that Indian companies aspire to.
Shares are a common currency for acquisition and Indian companies would be shut out of overseas buyout opportunities if they are not allowed to issue them. While dual listing is a step towards capital account convertibility, it is not necessarily a giant one. The Companies Act will also have to be amended to take into account taxation and accounting implications for a dual-listed company.
But the risks of capital outflows may not be huge. We probably have more money flowing out due to over and under-invoicing on the trade account.
As the government gradually opens up the capital airgel, issuing ordinary shares to overseas investors ought to merter on the agenda.
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