Singapore: Indian billionaire Anil Ambani, whose flagship company Reliance Communications (RCom) is in talks with South Africa-based MTN, is looking to buy more than 40% in the telecom major, the Financial Times reported in its Asia edition on 17 June.
The newspaper also said the talks have been complicated by the threat of legal action by Ambani’s elder brother Mukesh, who is claiming a right of first refusal over any stake sale by RCom.
The report said Ambani was looking for ways to increase his “in-effect” controlling position in the South African firm.
Quoting people familiar with the situation, the newspaper said, “... Mr Ambani was looking at how he could maximize an in-effect controlling position in MTN by seeking to persuade the South African mobile operator’s shareholders to waive their right to a tender offer.”
Mukesh and Anil Ambani at a meeting in Mumbai in a 24 June 2004 file photo. Talks between Anil and MTN have been complicated by a threat of legal action by Mukesh, who claims a right of first refusal over any stake sale by RCom. Photo: Reuters
It was thought Ambani would limit himself to a 34.9% stake in MTN, because if it went higher, then he would be required under South African laws to make an offer to buyout the other shareholders of the telecom major.
“... Mr 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 agree, Mr Ambani may end up owing 40-45% of MTN,” the report said quoting both people familiar to the situation and a person close to the talks.
Last month, RCom and MTN had entered into a 45-day exclusivity talks to explore the possibility of a merger. These talks had begun on 26 May.
Even though, several transaction structures have been examined, no conclusion has been reached yet.
According to the newspaper, Ambani is seeking to engineer a de facto takeover of MTN under which he would swap most of his 66 per cent shareholding in RCom for a near-controlling stake in the merged entity.
“The talks are politically sensitive because MTN is one of South Africa’s most successful post-apartheid companies. Any deal with Reliance would almost certainly be presented as a merger,” the report said.
“MTN’s largest shareholders are Newshelf, a company that holds 13% on behalf of the group’s staff, and Public Investment Corporation, a South African state-owned pension fund, which also has 13%,” the Financial Times said.
The next largest shareholder in the South African firm is M1, with almost 10% on behalf of Lebanon’s Mikati family.
Further, the newspaper said the precise size of Ambani’s share in MTN would be influenced by the take up of an expected tender offer by the African firm to RCom’s minority shareholders.