Bharti, MTN reach pact on $24-bn deal

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Bharti Airtel Ltd (BHARTIARTL.BO : 414.65 -7.2), India's biggest mobile-phone company, and South Africa's MTN Group Ltd have reached a $24-billion preliminary agreement to buy each other's shares, the first step in a planned merger, three people familiar with the matter said.

Bharti sweetened its bid to buy 49% of MTN by increasing the cash portion of its $14-billion offer, the people said, asking not to be identified before an announcement later this month. MTN, Africa's biggest wireless company, and its shareholders are poised to acquire 33% of Bharti for about $10 billion, they said. In a note issued late on Wednesday, Bharti stated: "There have been reports in some sections of the media that a preliminary agreement has been reached between Bharti Airtel and MTN. We would like to categorically deny that any such agreement has been reached between the two companies. The discussions are still on."

The world's biggest cross-border deal this year would pave the way for the creation of a mobile-phone carrier with annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai. The accord would need the approval of 75% of MTN's shareholders, some of which have said Bharti should raise its offer from a bid disclosed in May.

Singapore Telecommunications Ltd, which owns about 30% of Bharti, agreed to invest as much as $3 billion to buy Bharti shares, according to the people.

Bharti agreed to give $4 billion in stock to two of MTN's biggest shareholders, M1 Group and South Africa's Public Investment Corp, while offering remaining shareholders $10 billion in cash, the people said.

Bharti said on May 25 it offered 86 rand in cash plus half a Bharti stock for each MTN share for a 49% stake, while Africa's largest mobile-phone company and its shareholders would acquire 36% of the New Delhi-based operator. Bharti said at the time the value of the deal may exceed $23 billion.

Bharti fell 3.5% to close at Rs 409.35 on the NSE (^NSEI : 4810.35 -19.2) on Wednesday, trimming its gain this year to 14%. MTN rose 1.5% in Johannesburg trading to 126.50 rand as of 2.38 pm local time. Shareholders of about 20% of MTN have said they didn't support Bharti's initial bid. Some demanded an all-cash offer.

Coronation Fund Managers Ltd, which holds about 5% of MTN, said on August 20 it wanted about 31% more for its stake in Africa's largest wireless provider. The fund also wanted an all-cash offer, instead of Bharti's proposed stock-and-cash bid, it said then.

MTN CEO Phuthuma Nhleko has been looking to expand in markets outside the continent and said in March the company wanted to make a "meaningful" acquisition this year. The company last year failed to close deals with Bharti and its nearest Indian rival Reliance Communications Ltd (RCOM.NS : 292.85 -5). The combined operation will help Bharti chairman Sunil Mittal increase overseas sales at a time when Reliance and Vodafone are narrowing its lead in India.

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