FM favours Bharti-MTN merger, not dual listing
FINANCE minister Pranab Mukherjee on Tuesday indicated India’s support for the proposed alliance between Bharti and MTN as South Africa waved the red flag of national pride and insisted on its homegrown multinational retaining its character as a South African entity following any deal between the mobile phone companies.
At the heart of the issue between the two governments is the question of allowing a dual listing company structure for Bharti-MTN, and Mr Mukherjee suggested, but did not promise, that South Africa’s concerns would
be addressed.
“There is a provision for the dual listing of companies. The South African minister (Pravin Gordhan) met me at G-20 finance ministers meeting (in London earlier this month) and there I suggested to him that this arrangement is to be looked into in the Indian context.... There is no assurance as such, but I told him that we will look into this matter and we will see what can be
done,” Mr Mukherjee told ET Now, this paper’s television channel. Mr Mukherjee also wrote in a September 10 letter to Mr Gordhan that “we need to move together to enhance cooperation in trade and investment matters and a deal such as the one under consideration would be a good example of such an effort....”
Dual-listed companies retain their separate legal identities and listings on stock exchanges while entering into “equalisation” agreements to collectively run operations and share profits or losses. Such arrangements are seen protecting the national identities of companies.
Dual listing is not allowed in India now and will need major amendments to key corporate laws. On Monday, Bloomberg cited a spokesman for South Africa’s communication minister and reported that MTN should keep its South African character to win approval for an alliance with Bharti. “We obviously value MTN as a South African company; we want it to retain that character,” it quoted Tiyani Rikhotso, a spokesman for communication minister Siphiwe Nyanda, as saying.
The proposed $23 billion deal’s contours, unveiled in May, involves MTN taking a 25% economic interest in Bharti Airtel for $2.9 billion plus new shares in the South African t e l c o whichisequiva l e n t to 25% percent of MTN’s existing shares. Besides, MTN shareholders will also get an 11% stake in Bharti Airtel through GDRs that will be listed on the Johannesburg Stock Exchange.
The deadline for exclusive talks has already been extended twice and the latest one expires on September 30. A senior finance ministry official told ET that the South African government’s request to allow dual listing is difficult to oblige under current laws and India has clearly told South Africa that this issue is presently not on India’s radar.
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What is the big disconnect?
The issue between the two governments’ centres around the question of allowing a dual listing company structure for the proposed Bharti-MTN entity
South Africa has insisted on its MNC retaining its national character following any deal between the cellphone firms
Why’s dual listing a snag?
Dual listing of shares requires changes in the Foreign Exchange Management Act and the Companies Act, which cannot be done in haste for the sake of one corporate deal, says the finance ministry
It also involves taking a policy call on full capital account convertibility, which the government will do at an appropriate time
Will the SA demand derail the deal?
Analysts don’t think so because MTN wants dual listing only when the eventual merger takes place and both companies have said they will work towards a full merger in the future, indicating that such a development is not imminent
Dual listing demand unlikely to trip deal
THE official pointed out that India already allows dual listing of receipts by companies, a fact that was alluded to by the finance minister on Tuesday in Chennai. He said the country allows foreign firms to issue Indian Depository Receipts while Indian companies can issue ADRs or GDRs. By doing so, shareholders of these companies get all benefits except voting rights, which they can acquire through direct foreign investment.
India has also clarified that a bilateral investment promotion agreement that is under negotiation between the two countries would include provisions for mergers and acquisitions but not provide for dual listing of shares.
Dual listing of shares requires changes in the Foreign Exchange Management Act and the Companies Act, which cannot be done in haste for the sake of one corporate deal, the finance ministry official observed. Dual listing also involves taking a policy call on full capital account convertibility, which the government will do at an appropriate time, he added.
On Tuesday, Reuters reported that South Africa’s communications regulator might not grant approval for the proposed tie-up this year. It also quoted South Africa’s communication minister as saying that he was not interested in blocking the deal. “What I am saying is all we are interested in is what kind of management agreement outcome results out of this and all we want is that this remains a South African company. That is all.”
Merger talks between Bharti and MTN collapsed in May last year amid disagreements over who would control the merged entity. Bharti Chairman Sunil Mittal had then said that the deal was “unacceptable” because “Bharti’s vision of transforming itself from a home-grown Indian company to a true Indian multinational telecom giant, symbolising the pride of India, would have been severely compromised”. The lobbying for dual listing is primarily aimed at protecting MTN’s national identity and ensuring that its shareholders get the best deal possible, a telecoms analyst said.
Analysts say that the South African government’s demands to allow dual listing will not be a hurdle that will trip the deal. This is because MTN wants dual listing only when the eventual merger takes place and both companies have said that they will work towards a full merger in the future, indicating that such a development is not imminent. The deal in its current form just involves both firms paying cash and equity for stakes in each other and analysts are of the view that MTN is only seeking an ‘indicative assurance from the Indian government’ over its future when it plans to list in India.
Source: Economic Times
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