Bharti Airtel and MTN extend talks, structure to change?

The celebrations will have to wait longer for what has been touted as a major south-south corporate alliance. Bharti Airtel and South Africa’s MTN have decided to extend their talks for a possible merger, to end August 2009. The two companies had announced a tentative structure for the transaction, which would have left both companies holding stakes in each other. According to the then announced structure, Bharti will own a 49% stake in MTN, which in turn (along with its shareholders) will own a 36% stake in Bharti.

Both companies have been in informal talks with external stakeholders like the government to get an informal okay for the merger. Sebi had also given an informal guidance to Bharti stating that if MTN takes a stake in the company through a GDR issue, MTN will not need to make an open offer as per Sebi’s takeover regulations.

But there seem to be more hurdles in the way and it is not known whether these are with respect to valuations, the deal structure or regulatory hurdles. The press release is silent on the issue and limits itself to saying that the structure and terms may be changed to reflect further discussions. The price is likely to play a key factor. Bharti was to acquire MTN’s shares at a price of ZAR86 per share while the current price is ZAR128. MTN’s shareholders may want a higher price to agree to the deal.