Wednesday, May 27, 2009

SingTel - Outperform by CIMB (26 May 09)

Second time lucky?

SingTel’s 35% associate Bharti has reinitiated efforts to acquire MTN Group via a partial cash and share-swap deal. MTN is a South African-listed company with mobile operations in 21 countries (Figures 1 & 2). Bharti and MTN have agreed to discuss the potential deal until 31 Jul 09. This follows failed efforts by Bharti to acquire MTN in May 08.

Bharti is proposing to acquire 49% in an enlarged MTN via:
• Paying R86/share for 36% of existing MTN shares worth US$7.0bn, and
• Issuing 0.5 new Bharti share for every one MTN share acquired. This works out to Bharti issuing 234m new shares or 12.3% of its existing shares or 11% of an enlarged share base.

In turn, MTN and its shareholders will buy 36% of an enlarged Bharti with US$2.9bn in cash and 25% of new MTN shares, where 25% of Bharti will be held by MTN and the balance held by MTN shareholders.

The net transaction is:
• Bharti pays US$4.1bn cash to MTN/MTN shareholders (US$7.0bn paid out less US$2.9bn received)
• Bharti buys 49% of MTN
• Bharti’s share base is diluted by 36%, and
• MTN and MTN shareholders buy 25% and 11% of an enlarged Bharti respectively.

Both telcos stressed that “discussions are at an early stage and may or may not lead to any transaction.” The structure of the deal may be adjusted to reflect further discussions between the parties. Bharti will be able to consolidate MTN’s accounts fully as it will have substantial participatory and governance rights in MTN. MTN would have certain rights to increase its economic interest in Bharti in the future, but no details were given.

No comments:

Related Posts Plugin for WordPress, Blogger...

My Blog List