A deal between South Africas MTN Group Ltd. and Indias Reliance Communications
Ltd. could be announced this weekend, despite threats of legal action to block
the deal, two people familiar with the situation said.
MTN and Reliance "are getting very close to announcing the deal. If there are no
last-minute disagreements, the announcement may come as early as Sunday or
sometime next week," one of the people said.
Wednesdays comments came after people familiar with the situation said last
week that MTN is concerned that a feud between the two brothers who control
Reliance Group companies may jeopardize the merger talks.
Since late May, R-Com, controlled by Anil Ambani, has been in exclusive talks
with MTN over a possible combination that would create a telecommunications
empire stretching from Africa through the Middle East to India.
In June, Reliance Industries Ltd., controlled by Mukesh Ambani, Anils elder
brother, sent a letter to MTN saying the firm had the right of first refusal on
any deal involving a sale of R-Com.
"The deal will be worded in such a way that it will likely avert a lawsuit from
being filed. But, in any case, [R-Com and MTN] are prepared to move forward and
deal with the Mukesh Ambani challenge when and if it comes. Their lawyers are
telling them its an acceptable risk to take," one of the people said.
The exclusive period in which R-Com and MTN can hold talks ends July 9. A second
person familiar with the talks said the two sides are trying hard to reach a
deal before that date. "The announcement will outline the broad parameters of
the deal. How much MTN will buy in R-Com and the management structure of the
merged entity," this person said. The person added that if unexpected problems
arise, the two sides may mutually agree to extend their exclusive negotiations.
Talks between the two telecom operators are centered on Anil Ambani likely
selling his 66% in R-Com to MTN in a share swap. Under this scenario, he would
emerge as the biggest shareholder of the merged entity but R-Com would become a
subsidiary of MTN.
"MTN wants the maximum 74% stake allowed by Indian regulators in R-Com, but
since a close to 10% stake is already held by foreign investors, MTN may have to
settle for around 64%. MTN will then make a general offer and buy the remaining
stake," the second person said.
This person said the deal will be finalized after four months, when MTN and
R-Com receive all necessary approvals from various regulators.
Reliance is among Indias biggest mobile operators and is valued at $26 billion.
MTN, Africas dominant telecom company, has a market capitalization of about
Officials at R-Com and Reliance Industries declined to comment. MTN couldnt
immediately be reached for comment.
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