The MTN - Bharti deal that was revived in May 2009, has been called off again. The deal was supposed to be finalized by mid Sep2009 but it has failed yet again.
Theories on what caused the deal to break again?
- Demand for dual listing which means that the merged company will have a unified business operation structure but have their own set of shareholders. Indian laws don't allow dual listing but the government was ready to give its backing to the deal.
- South African government's stand that post merger firm should be a a South African firm. Many analysts may infer that the interference of governments cause the deal to fail.
(It's a case of how government interests over-rule business interests so that the nationality of the firm can be preserved. Ratan Tata during his acquisition of Corus too, faced similar hurdles from the respective government. Also, when Ranbaxy was taken over by the Japanese company Daiichi, there was a huge disappointment in the political circles about hurting the Indian pride, but there was no government opposition to the deal. Earlier too, South Africa has tried to block takeover deals by UK mining conglomerate Xtrata. India, too is often chided for its tight regulations which stem foriegn investment in many of its industries)
The two companies had an exculsivity clause that ended in September. This meant that they could not engage in merger talks with any other company during this period.
Other Losers
- Banks have also lost out on approx. $50 million merger & acquisition fees.(source:Reuters)
- Bank of America Merrill Lynch and Deutsche Bank, were advising MTN.
- Standard Chartered and Barclays, were advising Bharti
Going forward
- MTN and Bharti may seek to resolve the regulatory hurdles and once again restart the merger talks.
- The deal had to be ended because the exclusivity period ended but can be brought back on tack.
The back ground of the MTN Bharti deal was discussed in an earlier blog.
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