Johannesburg ( IT News Africa) MTN’s merger with Bharti Airtel maybe in jeopardy after a group of Indian investors has approached the country’s regulator, Securities and Exchange Board of India (SEBI), to investigate the deal, Times of India said on Tuesday.
According to the report The Indian Investors Protection Council (IIPC) has written to SEBI Chairman C B Bhave, with a copy sent to Bharti Airtel chairman Sunil Bharti Mittal, asking Sebi to investigate if regulations have been breached for exempting MTN from making an open offer to Indian shareholders.
IIPC has asked Sebi to withdraw its informal guidance dated June 22, 2009, exempting the potential acquirer from making an open offer to Indian shareholders, alleging that this exemption has been obtained by misrepresenting facts relating to the merger between Bharti Group’s unlisted companies and MTN. The provisions and regulations under the Takeover Regulation, 1997 have been circumvented, which is oppressing and diluting the rights of the Indian shareholders, IIPC writes.
The IIPC warns that any inaction by Sebi could trigger probes by the ministries of company affairs, finance, IT & communications, home affairs, FIPB, RBI and FEMA. Bharti’s spokesperson declined to comment claiming, “We have not received any communication in this regard.”
“The net effect of the private merger deal will be that the promoters of Bharti Telecom Ltd, the Mittal Brothers alone will acquire 49% of equity shares with voting rights in one shot, whereas MTN and its shareholders will be issued 36% of GDRs with voting rights only upon conversion into equity shares — 25% in Bharti Airtel and 11 % shares from Bharti Telecom. The merger is not between the two listed public companies Bharti Airtel and MTN but among the promoters holding substantial stakes through private deal,” the letter says.
“Except the Bharti brothers no one seems to be aware of the details as to which private company and on what valuations/considerations the Bharti brothers would acquire 49% equity shares of MTN. Neither Bharti Airtel’s shareholders nor the company itself are likely to be the beneficiaries of the merger deal. In all likelihood the shareholders money will be converted into closely held private wealth,” it points out.
Under the terms of the proposed deal which has 31 August 2009 as deadline, Bharti would acquire a 49% shareholding in MTN. MTN and its shareholders would also acquire an approximate 36% interest in Bharti, of which 25% would be held by MTN with the remainder held directly by MTN shareholders.
The potential transaction between would create a telecommunications service provider group with huge footprints on the Indian sub-continent, as well as within Africa and Middle East. The merged organization would boast a footprint in around 30 countries, with revenues over USD20 billion, and more than 200 million subscribers.
By ITnewsAfrica.com
