Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 104 views

    C - B M: T F B - MTN D: Subject: Corporate Law: Mergers Legislations

    Uploaded by

    Anjani
    1) Bharti Airtel had negotiations in 2008 and 2009 to merge with South African company MTN in a $24 billion deal that would have created the world's third largest telecom company. 2) The deal involved MTN acquiring 25% of Bharti Airtel and Bharti Airtel acquiring 36% of MTN, using a dual listed company structure. 3) However, the deal fell through due to regulatory hurdles. Indian law does not allow dual listing, and SEBI takeover regulations would have required additional public offerings that the companies did not want to undertake. The South African government also did not want MTN to blend into

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    C - B M: T F B - MTN D: Subject: Corporate Law: Mergers Legislations

    Uploaded by

    Anjani
    104 views2 pages
    1) Bharti Airtel had negotiations in 2008 and 2009 to merge with South African company MTN in a $24 billion deal that would have created the world's third largest telecom company. 2) The deal involved MTN acquiring 25% of Bharti Airtel and Bharti Airtel acquiring 36% of MTN, using a dual listed company structure. 3) However, the deal fell through due to regulatory hurdles. Indian law does not allow dual listing, and SEBI takeover regulations would have required additional public offerings that the companies did not want to undertake. The South African government also did not want MTN to blend into

    Original Title

    Cross Border Mergers

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1) Bharti Airtel had negotiations in 2008 and 2009 to merge with South African company MTN in a $24 billion deal that would have created the world's third largest telecom company. 2) The deal involved MTN acquiring 25% of Bharti Airtel and Bharti Airtel acquiring 36% of MTN, using a dual listed company structure. 3) However, the deal fell through due to regulatory hurdles. Indian law does not allow dual listing, and SEBI takeover regulations would have required additional public offerings that the companies did not want to undertake. The South African government also did not want MTN to blend into

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    104 views2 pages

    C - B M: T F B - MTN D: Subject: Corporate Law: Mergers Legislations

    Uploaded by

    Anjani
    1) Bharti Airtel had negotiations in 2008 and 2009 to merge with South African company MTN in a $24 billion deal that would have created the world's third largest telecom company. 2) The deal involved MTN acquiring 25% of Bharti Airtel and Bharti Airtel acquiring 36% of MTN, using a dual listed company structure. 3) However, the deal fell through due to regulatory hurdles. Indian law does not allow dual listing, and SEBI takeover regulations would have required additional public offerings that the companies did not want to undertake. The South African government also did not want MTN to blend into

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    CROSS-BORDER MERGERS : THE FALLOUT OF BHARTI-MTN DEAL

    Subject: Corporate law: Mergers


    Legislations :
     Companies Act, 1956.
     Foreign Exchange Management Regulations, 2000
     Substantial Acquisition of Shares and Takeover Regulations, 1997
    (SEBI Takeover Regulations).

    I. INTRODUCTION

    Mergers and Acquisitions Aka M&A as has been their nick name, garnered for itself a lot of
    attention since a decade. Twenty- first century organizations are more goal focused or rather
    inclined towards utilitarianism, that is to say the identity doesn’t cater importance but the
    maxim profits that satisfies the majority shareholders. M&A may be undertaken to access the
    market through an established brand, to get market share, to eliminate competition, to reduce
    tax liabilities or to acquire competence or to set off accumulated losses of one entity against
    the profits of other entity.1

    The globalization and liberalization of marketing and investing policies of various countries
    have consequently resulted in the growth of cross-border mergers and acquisitions. In the
    conventional mergers and acquisitions, the primary objective of a cross-border merger is to
    acquire larger shares of the market with increased economies of scale through the newly formed
    organization,which would be otherwise impossible by the companies operating independently.2

    This being the brighter side of the aspect, the darker side has huge affects on the financial
    system of the country. Earlier the Indian capital markets were thin and restricted but now it is
    drastically impacting on the resource allocation process of the economy. With the foreign
    capital market issuing overseas (American Depository Receipts & Global Depository
    Receipts), there is a huge domestic resource mobilization by the corporate. With the more and
    more transaction of great magnitude, new permutation and combination of problems are
    arising. 3 One such being the instant case.

    II. HOW IS BHARTI-MTN DEAL ANY DIFFERENT FROM THE CONVENTIONAL


    MERGERS?

    The only thing for which, people are ready to donate their organs is mobile, which is nothing
    but a futile 4.5 inch plastic, without mobile services. Bharti Airtel has achieved a significant
    milestone in India with decreased call rates, increased mobile data speed and high profits which
    encouraged it to strike a deal with a South African based company, MTN Ltd in 2008 and 2009.
    Bharti Enterprises overlooked the future of the telecom industry in South Africa, which was
    immensely growing as against the Indian market which was projected to reach a flat customer

    1
    Vikram Malik, Revision of the Companies Act, 1956, INDIA LAW JOURNAL, available at
    www.indialawjournal.com/volume1/.../article_by_vikram_malik.html (Last visited on January 28, 2019).
    2
    Ibid.
    3
    Depository Receipts and the Takeover Regulations, available at
    http://indiacorplaw.blogspot.com/search?q=bharti+mtn+GDR (Last visited on January 28, 2019).
    base. In 2008, the two telecom enterprises failed negotiations, when at the last-minute MTN
    demanded Bharti Airtel to become its subsidiary. Talks of a $24 billion deal with MTN started
    in 2009, to make it what would be the world’s third largest telecom company also shattered
    due to the regulatory hurdles of the South African Government.

    The deal was for MTN to buy 25% of Bharti, where as Bharti would acquire about 36% of
    MTN’s equity and all of this with the Dual Listed Company (DLC) structure led to the fall out
    of the deal.

    III. THE GRAND FALLOUT

    To elaborate DLC (also referred to as a ‘Siamese Twin’), the foreign countries agree in a
    contract called the “Equalization Agreement” to operate the business independently, retaining
    the identity, the stock exchange listing and creating separate shareholder registry. Companies
    usually succumb to dual listing structure at times to avoid the capital gains tax which is levied
    during the conventional method of merging. Conventional merging also requires a lot of forms
    to be filled along with various officials’ approval which is not so in the case of a DLS. This
    way the respective companies preserve their identity and also reap the combined benefits of
    the merging. It also ensures equal rights of the shareholders both in voting, dividends and an
    appropriate management structure.

    The South African government wanted the MTN Enterprise to be enlisted in the Stock
    Exchange of India and vice-versa, but Indian laws do not allow dual listing. The obligations
    under Chapter-III of SEBI takeover regulations calls for the company to make a public offer to
    buy an additional 20 per cent equity beyond 15 percent.4 It also led to the speculation that the
    South African Government didn’t want the national character of the company to blend into a
    Indian Company. Various other complications along with the difficulty in amending SEBI led
    to the ‘deal of the decade’ being scrapped.5

    Name: Anjani Harika


    Semester and Roll Number: VIII Semester, 2015-041
    Ph. No: +91-9080400195

    4
    Amendment to the Takeover Regulation by SEBI, available at
    http:// www.sebi.gov.in /press/2009/2009300.html (Last visited on January 28, 2019).
    5
    Takeover Code revision to impact Bharti-MTN deal: Analysis, available at
    http://www.moneycontrol.com/news/cnbc-tv18comments/takeover-code-revision-to-impact-bharti-mtn-
    dealanalysis_416446.ht (last visited on January 28, 2019)

    You might also like