London: Anil Ambani hopes to remain a major shareholder in his flagship firm Reliance Communications and South Africa-based MTN after the two companies combine in a reverse merger, the Financial Times reported on 12 June.
Quoting people familiar with the deal, the newspaper said Ambani would swap two-thirds of his 66% stake in Reliance Communications for shares in MTN and retain 20-25% in the Indian cellular carrier.
Ambani would pay an extra $4-5 billion in cash to bring his stake in MTN to his target level of 34.9%, the ceiling beyond which he would be forced to make a general offer for MTN, the newspaper said in an article published in its online edition.
According to Financial Times, the cash amount would be raised through debt or by enlisting the help of private equity investors or a combination of both, although the private equity portion would not be expected to exceed $2-3 billion.
“He continues to remain extremely bullish about Reliance Communications prospects and would like to remain present there while getting a bigger piece of the action in MTN,” the report said quoting an insider.
Last month, both companies had entered into “exclusivity talks” for a period of 45 days to explore the possibility of a merger.
“Both parties are expected to complete due diligence within a week, with an announcement on any deal expected early next month,” the newspaper said.
The deal between RCom and MTN would create one of the largest mobile operator in emerging markets with 115 million subscribers across India, Africa and the Gulf.
Under the proposal, RCom would be taken over and become a subsidiary of MTN, but through the share swap Ambani would become by far the biggest shareholder in the South African company, the report added.
Financial Times said Ambani is reluctant to surrender all of his exposure to RCom and is seeking to keep the 20-25% stake to ensure that he would remain the biggest individual shareholder in the company after MTN.
“If Mr Ambani’s proposal to hold large stakes in both companies is accepted by MTN, the South African operator would end up with a stake of about 51% in Reliance,” the report said.
The newspaper further said Ambani has appointed HSBC and Barclays to lead the debt financing for his proposal to use cash to top up his stake in MTN beyond that achieved by the share swap to his target of 34.9%.
“The move comes amid speculation that Mr Ambani is angling to retain a senior position in Reliance Communications, where he is currently chairman, while also becoming the chairman or co-chairman of MTN,” the newspaper added.
Ambani is also being advised by Deutsche Bank on raising private equity financing for his bid. Further, Lehman Brothers and Lazard are also advising Ambani.
MTN is being advised by Merrill Lynch and Deutsche Bank.