East African Business Week (Kampala)
12 May 2008
Kampala — After nearly two weeks of speculation and denials, the South African mobile network company MTN has said it is in 'exploratory' discussions with the New Delhi-based Bharti group for a possible takeover or a strategic alliance.
Market analysts here said MTN was forced to make a statement after international media speculation about the potential deal.
MTN released a statement after markets closed Monday evening. This followed a day of intense interest in MTN, with shares in the company closing nearly four percent higher than at the start of the day.
The statement said MTN was engaged in discussions with Bharti Airtel which may have a material effect on the price of the company's securities if successfully concluded.
"The discussions are exploratory in nature and may or may not lead to any transaction. Accordingly, shareholders are advised to exercise caution when dealing in the company's securities until a further announcement is made.'
Earlier, the company said it had noticed some speculation in the media regarding a potential offer.
"MTN receives tentative approaches from time to time, which are always evaluated by the company. The board of MTN has not received any specific proposal and if and when there is anything specific to report, the market will be notified.'
Despite these denials, worldwide media reports indicated otherwise.
The Financial Times, quoting an anonymous source, claimed two weeks ago that Bharti Airtel was considering making an offer for MTN. The MTN share price jumped seven percent on that report.
Besides MTN denying any specific offer at that time, and even a statement by Akhil Gupta, a managing director at Bharti Airtel, that there was nothing on the table, the market continued to react to the speculation.
Analysts said any agreement reached would most likely result in a strategic alliance rather than a full takeover of MTN by Bharti Airtel. There were also views that MTN, an aggressive buyer in recent years, might want a stake in Bharti Airtel to gain access into the Asian market.
The Financial Times had earlier reported that Bharti Airtel was considering two options.
The first was a 51% acquisition of MTN while still retaining its listing on the JSE; while the second was a buyout of MTN with a cash and share offer to shareholders, with a secondary listing on the JSE for Bharti Airtel.
The two companies have a market value which is reasonably similar - Bharti Airtel is valued at about $44b and MTN at $35b. MTN has more than 68m clients in Africa and the Middle East.
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