India’s Bharti Airtel said late on Wednesday it and South Africa’s MTN had called off talks for a planned tie-up owing to the inability of the South African government to accept the deal in its current form.
”Bharti and MTN have decided to disengage from their discussions when the exclusivity period ends on September 30 2009,” Bharti said in a statement.
”This structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form. In view of this, both companies have taken the decision to disengage from discussion,” it said.
Bharti said it hoped the South African government would review its position in the future and allow both companies to re-engage.
Bharti and MTN revived merger talks in May, a year after previous talks broke down over who would control a merged entity. A merger would create an emerging markets giant with more than 200-million customers across India, Africa and the Middle East.
The talks had been extended twice and the current deadline was until Wednesday.
The deal faced scrutiny from regulators and politicians. South Africa is eager to retain MTN’s national character and had approached Indian authorities to consider a dual-listed entity, a structure Indian laws currently do not allow.
Under the initial tie-up terms outlined in May, MTN and its shareholders would take a 36% economic interest in Bharti and the Indian firm would end up with 49% of MTN.
Bharti increased the cash component of its offer for that 49% stake to $10-billion from a proposed $7,6-billion, two people familiar with the matter have said.
On top of that, Bharti would pay $4-billion in stock for a total package of $14-billion, 7% more than initially proposed, according to sources.
Another hurdle for the deal emerged last week when India amended its takeover rules, requiring a company buying 15% of an Indian firm through American Depositary Receipts (ADRs) or Global Depositary Receipts (GDRs), with voting rights, to make a mandatory offer for a further 20%.
Under the new rules, MTN might have been required to make an offer for an additional 20% stake in Bharti, if it is issued GDRs with voting rights. That would mean an additional cost of almost $7-billion based on Bharti’s market value of $33-billion.
Meanwhile, South Africa’s rand extended its losses against the dollar on Wednesday after the announcement that the talks were being called off.
The rand fell more than 2% to as much as 7,62 against the dollar, from Tuesday’s New York close of 7,43. It last traded at 7,5650. — Reuters