Regulator exempts MTN from open offer for Airtel shares


New Delhi : The market regulator has permitted telecom major Bharti Airtel and South Africa’s MTN to go ahead with their proposal to buy each other’s shares in a $25 billion deal without the latter having to make an open offer in Indian equities markets.

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In a notification issued Tuesday, the Securities and Exchange Board of India (SEBI) said: “The proposed deal structure does not require an open offer since MTN’s shareholding in Bharti will only be through GDRs (global depository receipts).”

SEBI also said the open offer will be applicable only once the GDRs are converted to local shares with voting rights.

GDR is a negotiable certificate issued by one country’s bank against a certain number of shares in its custody but traded on the stock exchange of another country.

On completion of the deal, as per the GDR issue approved by SEBI and initial discussions, Bharti Airtel will get a 49-percent stake in MTN in exchange for 36 percent of its own equity base.

“The transaction contemplates issuance of global depository receipts (GDRs) by Bharti Airtel Ltd (BAL) to MTN and its shareholders, whereby MTN would receive GDRs which if exchanged for underlying shares of BAL would constitute approximately 25 percent of the share capital of BAL,” Bharti Airtel had told the the market regulator last month.

“Similarly, MTN shareholders would receive GDRs with underlying shares approximating 11 percent of BAL’s share capital. The shares underlying the GDRs will be issued to the overseas depository bank and shall rank pari passu with the other issued shares of BAL,” it added.

In May, the two telecom giants had resumed negotiations which had collapsed after Bharti Airtel rejected MTN’s proposal that would have made the Indian firm a subsidiary of the South African company.

Following that, the South African group had started negotiations with the Reliance Anil Dhirubhai Ambani Group, which also failed.

“Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until July 31, 2009,” an official statement issued by them earlier had said.