MTN-Reliance Deal

Dear Friends,

This is a thread to discuss,suggest and list all possible information on a dramatic deal that could take the Indian Technology Sector to another Orbit.

RCom plans to raise $5 bn for MTN deal

http://economictimes.***************/RCom_plans_to_raise_5_bn_for_MTN_deal/articleshow/3194855.cms

Looks like the marathon man is on top at the moment

MUMBAI: Anil Ambanis Reliance Communications (RCOM) is in talks to raise up to $5-6 billion from banks to part-finance its planned acquisition of the South African telco MTN. RCOM may pledge the shares of MTN to raise the funds and also provide some sort of guarantee to the lenders.

Sources in the know said Deustsche Bank, HSBC and Barclays, among others, are putting in place short-term financing for RCOM to finance the deal. A few Indian banks and a host of European banks have also offered an underlying commitment to lend money for the transaction. RCOM will have to repay this debt in a year or so by raising long-term funding.

RCOMs 45-day exclusivity period (during which MTN could not consider any alternative partner) ends on July 7. Its unlikely that the transaction would be completed by then, said a source in the know. Instead, the exclusivity period might be extended.

The entire transaction is expected to be routed through a special purpose vehicle (SPV). In addition to RCOM, other partners could also pick up equity in this SPV. RCOM is learnt to have been in talks with a Middle East-based sovereign wealth fund and a couple of private equity players to offer stake in the SPV.

It is learnt that the private equity funds are not-so-keen to participate in the SPV, while the sovereign fund is interested in it. RCOM will likely hold a majority equity stake in the SPV.


Sources said the other equity holders of the SPV are expected to chip in around $4 billion. Given MTNs current valuation of nearly $28 billion, a deal is expected to be done at a valuation of around $35 billion, assuming a 20% premium. This means, the SPV may need to pay around $11-12 billion for a 35% stake.

Given the other equity holders contribution of $4 billion, RCOM will have to chip in around $7 billion to $8 billion. This is likely to be funded by a mixture of internal accruals and debt. The exact amount of debt depends on the amount of equity which RCOM is willing to put in. The acquisition cost will go up if RCOM is allowed to hike its stake further to 40%. Both the parties are yet to arrive at the exact deal size which would depend on the premium, sources said.

Lets analyze the massive synergies that could arise once Ambani powers MTN.

RCom may get 20% fresh equity in MTN
Rajesh S Kurup & Nevin John / Mumbai July 05, 2008, 0:16 IST

Move to skirt public offer for S African telco.

South African telecom major MTN Group is considering issuing as much as 20 per cent fresh equity to Anil Ambani-controlled Reliance Communications (RCom) as part of a multi-stage merger deal.

The fresh equity will have special voting rights helping Ambani gain greater control over the company.

The deal will help Ambani own up to 34.99 per cent stake in MTN to avoid a tender offer under South African rules. It will also enable one of the MTN promoters to buy stake in RCom as part of the reverse merger process.

Sources familiar with the developments said one of the MTN promoter families is looking at selling 9 per cent to RCom in exchange for a similar stake in the latter.

When contacted, an MTN spokesperson Nozipho January-Bardill declined to comment on the development. An RCom spokesperson also reserved his comments.

A 34.99 per cent stake will make Ambani the largest shareholder in MTN.

Lombard Odier Darier Hentsch & Cie, promoted by Lebanon's former prime minister Najib Mikati, holds 9.82 per cent, Newshelf 664 (Proprietary) Ltd holds 13.06 per cent and directors and subsidiaries hold 0.03 per cent. The public and financial institutions hold the rest.

RCom's shares were up 12.5 per cent to Rs 438.20 on the Bombay Stock Exchange today.

RCom's share price has fallen 19.33 per cent since May 26, when the company signed a cautionary agreement to acquire stake in MTN.

RCom is also believed to be restructuring the deal in a way that the right of first refusal, as mentioned by Reliance Industries in a recent letter, is not invoked. The right of first refusal no longer applies if RCom's promoters maintain a majority stake in the company.

The sources also said RCom has sought an additional three weeks' time for exclusive talks and completion of due diligence. The earlier agreed 45-day exclusivity talk period ends on July 8.