Bharti Airtel ties up funds to buy Zain’s Africa assets

Telecom services operator, Bharti Airtel has tied up financing of $8.3bn for its $10.7bn or about Rs 49,000 crore bid to acquire Zain’s African operations. After the failure of its proposed acquisition of MTN, which attracted a lot of media coverage, Airtel has been keeping a low profile over the Zain Africa acquisition, with deal news coming out only at specific times.

The enterprise value of the transaction is $10.7bn, of which the actual payout is $9bn and $1.7bn is the net debt that will be taken over by Bharti. Of the $9bn, $700mn will be paid out after one year from the date of closing, presumably after certain pre-conditions have been met or to cover any liabilities. That is how the figure of $8.3bn has been arrived at. A procession of banks have lined up to finance the deal, including Standard Chartered Bank, Barclays Bank and State Bank of India. A total of 11 banks are financing the transaction. According to a company release, SBI Group is also providing a $1bn funding committee in rupee terms, which will also cover transaction costs.

While Airtel has ample cash reserves, its decision to go with a fully debt funded transaction is probably explained by the 3G tendering process that is underway, which will see a significant initial outflow for the successful bidders. The reserve price has been fixed at Rs 3,500 crore for a national 3G license.

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