The largest shareholder in South African mobile telecommunications group MTN has given its conditional support for the proposed deal with India's Bharti Airtel.
The Public Investment Corporation (PIC), which owns 13.5% of the shares in MTN, says it supports the deal conditionally, but there is some room for improvement on price. CEO Brian Molefe says the fund has not made a final decision yet on whether to support the vote on the deal.
Molefe says he appreciates MTN's need to diversify its revenue stream, but the details still have to be nailed down. He says support hinges on price and the extent of influence MTN would have in the merged entity.
Because of the strategic imperative of the deal, PIC would support it; it all depends on the final details, he notes.
MTN's second-largest shareholder, M1, also says it will back the proposed buyout by Indian telecommunications giant Bharti Airtel in a $23 billion deal.
Last week, Reuters reported MTN's second-largest shareholder, Lebanon's Mikati family, with 10.2%, supported merger talks with Bharti and would vote in favour of the $23 billion cash and share swap. Azmi Mikati, CE of the family's M1 Group, said that a proposed deal, under which the firms will take stakes in each other, was "fair for all parties" and said the family would back it if a firm offer was made.
"We are fully supportive of the transaction. It will add value for both Bharti Airtel and MTN shareholders," said Mikati, who is also a non-executive member of MTN's board, according to the latest annual report. "We will vote in favour of it. We don't look at any transaction with a short-term view, but through a long-term view."
Not so sure
However, local shareholders seem shy to commit until more information is forthcoming.
Absa Investments analyst Chris Gilmour says investors need more clarity on the deal, which seems to under-value MTN, Africa's largest cellular company. Absa, which holds a small stake in MTN, has been happy with its stake, which it has held for some time, it says.
Gilmour says the company has great growth potential, but there is quite a bit of uncertainty around the company's future should the deal go ahead. “I think it's very complicated at the moment.”
However, should the deal - Bharti's second attempt to take over MTN - not go ahead, Gilmour notes it is likely some other company would be keen to buy MTN. The cellular company would remain a target due to its ability to enter unchartered territory and be successful, he explains.
Irnest Kaplan, independent analyst and MTN shareholder, concurs that the information on the proposed deal is too sketchy. He says the deal is difficult to digest as a shareholder. “The deal is very convoluted.”
One issue is how the cross-shareholding would work, and what MTN shareholders would end up owing a stake in, he says. Kaplan suggests shareholders may be nervous at the thought that another company could have control.
In addition, the rationale could be better explained, as many MTN shareholders are happy with the direction MTN has been taking. “I don't like the ship to steer off course, and I know where that course is going.” Kaplan also wants to know who would be in charge of its destiny.
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