The $23-billion deal for the merger of Bharti Airtel and South African giant MTN, which would have been the world's largest in the telecom sector, today fell through.
Sunil Mittal-led Bharti called off discussions with MTN citing the South African government's rejection of the proposed merger structure, which would have created the world's third largest telecom company with combined revenues of over $20 billion annually and a subscriber base of over 200 million.
The issue of dual listing of MTN to maintain its identity in the merged company appears to have been the deal-breaker during the tough negotiations lasting well over four months.
Prime Minister Manmohan Singh had strongly backed the deal which he took up with South African President Jacob Zuma at the G-20 Summit in Pittsburgh last week.
While announcing the calling off of the talks, Bharti in a statement expressed the hope that the South African government "will review its position in the future and allow both companies an opportunity to re-engage".
This is the second time in just over a year when Bharti has been forced to abandon talks for amalgamation of the two organisations in a complex deal that also hinged on Indian government's clearance for dual listing.
"This transaction would have been the single largest FDI into South Africa and one of the largest outbound FDIs from India," Bharti statement said, adding "the structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form".
Senior management of Bharti, including Sunil Mittal, could not be reached immediately for comments as they are on a annual off-site, most likely in Pataya, Thailand.
After Bharti had called off negotiations with MTN last year accusing the South African entity of reneging on its commitment and presenting a different structure, Anil Ambani-led RCom had entered into negotiations with MTN for a deal.
This was also called off after Anil's elder brother Mukesh Ambani asserted the first right of refusal and
threatened a legal action. As per the proposed structure, Bharti would have acquired 49 per cent shareholding in MTN and in turn MTN and its shareholders would acquire about 36 per cent economic interest in Bharti.
The South African government had demanded dual listing of MTN in order to protect the character of MTN as a South African entity.
While starting the negotiations for the second time in May this year, Sunil Mittal had said "we see real power in the combination and we will work hard to unleash it for all our shareholders."
India Inc feels let down by deal failure Corporate India today felt let down by the failure of the $23-billion proposed merger deal between telecom giants Bharti Airtel and South Africa's MTN but said the south-south co-operation was still alive.
"In this particular proposed deal they (South African government) could have said they will make an exception in their law in terms of dual listing norms," Ficci secretary general Amit Mitra said.
He, however, said there was still scope in South Africa where Indian companies are preferred by "black administration" which today controls the country.
Assocham President Sajjan Jindal described the development as "the most unfortunate". He said the merger between Bharti and MTN would have provided a "golden opportunity" for India Inc to spread its wings in the global business space.
"It is most unfortunate. The MTN deal has been called off despite full support from the Indian government. It was a golden opportunity for India to globalise its wings," he said.
In a consolatory tone, CII director general Chandrajit Banerjee said the MTN deal not going through should not be seen as a dampener.
"India Inc has had many success in the past and in future too we can hope to see some large merger and acquisitions by Indian companies, including the likes of Bharti," he added.
PHDCCI president Satish Bagrodia, however, said: "Indian industry is quite disappointed with the proposed deal being called off. In future Indian companies will be over cautious."
Agencies
Showing posts with label merger. Show all posts
Showing posts with label merger. Show all posts
Thursday, October 1, 2009
Tuesday, April 7, 2009
Has IBM pulled out of $7b offer for Sun Microsystems?
IBM withdrew its $7 billion bid for Sun Microsystems on Sunday, a day after Sun’s board balked at a reduced offer, according to three people close to the talks.
The deal’s collapse after weeks of negotiations raises questions about Sun’s next step, since the IBM offer was far above the value of the Silicon Valley company’s shares when news of the IBM offer first surfaced last month. Sun, an innovative pioneer in computer workstations, servers and Internetera software, has struggled in recent years and spent months trying to secure a suitor. With IBM and others shying away from a deal, a bruised Sun could be forced to continue pursuing a solo business model whose prospects have been questioned by many analysts.
After the legal review, IBM shaved its offer on Saturday from $9.55 a share, the proposal on the table late last week, to $9.40 a share, said one person familiar with the talks. The offer was presented to Sun’s board on Saturday, and the board balked. The Sun board did not reject the offer outright, but wanted certain guarantees that the IBM side considered “onerous,” according to that person. Sun then said it would no longer abide by its exclusive negotiating agreement with IBM, a second person familiar with the discussions said. On Sunday, IBM’s board decided to withdraw the offer.
The breakdown in the talks, said the second person close to the negotiations, came over the shifting balance of price and conditions for the deal.
For example, IBM scrutinized the “change of control” contracts with Sun executives, senior engineers and managers. IBM felt that the payments to senior employees were higher and extended more broadly across the company than it had anticipated. IBM pointed to the change of control contracts as one reason it was reducing its offer price.
The breakup of the deal, analysts say, is a blow to Sun’s prospects. “For IBM, given its size, this was never a transformational deal,” said A M Sacconaghi, an analyst for the investment research firm Sanford C Bernstein.
“But in Sun’s case, it’s an extremely material event.” “This leaves Sun in a tough situation,” Sacconaghi added. “Sun was on a path to selling itself, and this will inevitably raise questions in customers’ minds, no matter what Sun says, about its commitment to a go-it-alone strategy.”
Sun was most concerned about securing tighter provisions to restrict IBM’s ability to walk away from the deal.
Whether the IBM decision amounts to a negotiating tactic to get agreement on the final sticking points is unclear. Though the offer is off the table for now, the two sides could resume bargaining if Sun’s share price drops from its $8.49 close on Friday and major investors pressure the company to come to an agreement. “There’s lots of testosterone going back and forth,” said a third person familiar with the discussions. All three people who discussed the deal would speak only on condition of anonymity because details of the merger talks are confidential.
Agencies
The deal’s collapse after weeks of negotiations raises questions about Sun’s next step, since the IBM offer was far above the value of the Silicon Valley company’s shares when news of the IBM offer first surfaced last month. Sun, an innovative pioneer in computer workstations, servers and Internetera software, has struggled in recent years and spent months trying to secure a suitor. With IBM and others shying away from a deal, a bruised Sun could be forced to continue pursuing a solo business model whose prospects have been questioned by many analysts.
After the legal review, IBM shaved its offer on Saturday from $9.55 a share, the proposal on the table late last week, to $9.40 a share, said one person familiar with the talks. The offer was presented to Sun’s board on Saturday, and the board balked. The Sun board did not reject the offer outright, but wanted certain guarantees that the IBM side considered “onerous,” according to that person. Sun then said it would no longer abide by its exclusive negotiating agreement with IBM, a second person familiar with the discussions said. On Sunday, IBM’s board decided to withdraw the offer.
The breakdown in the talks, said the second person close to the negotiations, came over the shifting balance of price and conditions for the deal.
For example, IBM scrutinized the “change of control” contracts with Sun executives, senior engineers and managers. IBM felt that the payments to senior employees were higher and extended more broadly across the company than it had anticipated. IBM pointed to the change of control contracts as one reason it was reducing its offer price.
The breakup of the deal, analysts say, is a blow to Sun’s prospects. “For IBM, given its size, this was never a transformational deal,” said A M Sacconaghi, an analyst for the investment research firm Sanford C Bernstein.
“But in Sun’s case, it’s an extremely material event.” “This leaves Sun in a tough situation,” Sacconaghi added. “Sun was on a path to selling itself, and this will inevitably raise questions in customers’ minds, no matter what Sun says, about its commitment to a go-it-alone strategy.”
Sun was most concerned about securing tighter provisions to restrict IBM’s ability to walk away from the deal.
Whether the IBM decision amounts to a negotiating tactic to get agreement on the final sticking points is unclear. Though the offer is off the table for now, the two sides could resume bargaining if Sun’s share price drops from its $8.49 close on Friday and major investors pressure the company to come to an agreement. “There’s lots of testosterone going back and forth,” said a third person familiar with the discussions. All three people who discussed the deal would speak only on condition of anonymity because details of the merger talks are confidential.
Agencies
Friday, March 27, 2009
IBM-Sun talks on merger to extend beyond a few weeks
IBM's talks to acquire Sun Microsystems Inc are continuing and may extend beyond next week, according to a person with knowledge of the matter.
IBM is still examining Sun's business as part of its due diligence process, said the source, who was not authorized to speak about the talks and therefore requested anonymity.
Neither IBM nor Sun has issued any statement to say they are in talks, although sources said last week that the two sides are negotiating a merger that would bolster IBM's high-end server and software business.
The Wall Street Journal reported on March 18 that IBM could pay as much as $8 billion for Sun, amounting to a 100 percent premium for the high-end server computer maker. If a deal is sealed, it would be IBM's largest acquisition.
The source said on Thursday that IBM's due diligence process, or examination of Sun's business, was necessary considering Sun's size and complexity.
An IBM spokesman declined to comment, and Sun was not immediately available.
Some analysts have said Sun would bolster IBM's position against rivals like Hewlett-Packard Co and Cisco Systems Inc, both of which have been acquiring smaller, niche technology firms to broaden their product and service offerings.
Agencies
IBM is still examining Sun's business as part of its due diligence process, said the source, who was not authorized to speak about the talks and therefore requested anonymity.
Neither IBM nor Sun has issued any statement to say they are in talks, although sources said last week that the two sides are negotiating a merger that would bolster IBM's high-end server and software business.
The Wall Street Journal reported on March 18 that IBM could pay as much as $8 billion for Sun, amounting to a 100 percent premium for the high-end server computer maker. If a deal is sealed, it would be IBM's largest acquisition.
The source said on Thursday that IBM's due diligence process, or examination of Sun's business, was necessary considering Sun's size and complexity.
An IBM spokesman declined to comment, and Sun was not immediately available.
Some analysts have said Sun would bolster IBM's position against rivals like Hewlett-Packard Co and Cisco Systems Inc, both of which have been acquiring smaller, niche technology firms to broaden their product and service offerings.
Agencies
Friday, November 21, 2008
Citigroup looks at sale of parts or merger
Citigroup Inc lost more than one-quarter of its market value on growing worries over whether it has enough capital to withstand billions of dollars of potential losses and despite new support from its largest individual investor.
The second-largest U.S. bank by assets is looking at options now, including a sale of parts of the company or a merger with another firm, after its stock fell 50 percent this week, a person familiar with the matter said on Thursday.
Discussions so far have been internal, and some options --such as entering into a merger where other executives end up running the company -- are unpalatable to managers at Citigroup, the person said. The bank's board of directors is set to meet on Friday, and Morgan Stanley is not considering a possible bid, the Wall Street Journal reported.
Citigroup did not comment on the report, repeating that it has a "very strong capital and liquidity position" and is focused on a strategy that will generate benefits "over time." Morgan Stanley did not immediately return a call for comment.
Earlier Thursday, Saudi Prince Alwaleed bin Talal said he plans to increase his stake in Citigroup to 5 percent from less than 4 percent, calling its shares "dramatically undervalued."
Alwaleed expressed "full and complete support" for management, including Pandit, who said this week the bank will slash 52,000 jobs and 20 percent of expenses.
Investors were unimpressed, and drove the bank's shares below $5, a level not seen since 1994. The market value of Citigroup has fallen $48.7 billion this month alone.
Citigroup is not seeking any government financial aid, and is not seeing any unusual business activity, a person close to the bank said.
But government aid may have to be part of any deal for Citigroup, investors said. Raising capital, whether through a share sale or selling businesses, would be difficult in the current environment.
Citigroup "will get bailed out, and that's another unfortunate strain on the U.S. government," said Saj Karim, an investment adviser at Cannacord Capital in Waterloo, Ontario.
The government may look to augment the $25 billion it injected last month from a $700 billion industry rescue package. The bank has raised another $50 billion since the middle of 2007.
Analysts said the bank could face more than $20 billion in losses in 2009 on commercial real estate, credit cards and emerging markets, as the world economy sinks into recession.
"How much capital is Citi going to need?" said Keith Davis, a bank analyst at Farr, Miller & Washington in Washington, D.C. "I don't think anyone knows, and so the knee-jerk reaction is to sell first and ask questions later."
The bank has asked the U.S. Securities and Exchange Commission to reinstate a ban on the short-selling of financial stocks, in an attempt to arrest their downward spiral, a person familiar with the matter said. A prior ban expired Oct 8.
Other banks' shares also tumbled on Thursday, with JPMorgan Chase & Co falling 17.9 percent and Bank of America Corp closing down 13.9 percent. Along with Citigroup, the banks are components of the Dow Jones industrial average, which shed 5.6 percent.
JPMorgan is eliminating about 3,000 investment banking jobs, or 10 percent of that unit, to cope with the deteriorating economy, people familiar with the matter said. Bank of New York Mellon Corp announced 1,800 job cuts.
And KeyCorp, a Midwest regional bank, reduced its common stock dividend for the second time in six months.
Citigroup's market value, which once topped $270 billion, fell to $25.7 billion on Thursday. The bank was overtaken in market value this week by U.S. Bancorp and Bank of New York Mellon, despite being more than four times larger by assets than those companies combined.
Five-year credit default swaps for Citigroup rose to 395 basis points, meaning it would cost $395,000 annually to protect $10 million of debt, according to Phoenix Partners Group. That's up from $357,000 of annual payments on Wednesday, according to Markit.
But those levels are not as high as they were for other banks just prior to failure. Combined with the low share price, markets seem to be implying that either Citigroup will raise capital without government help, or it will receive government help that does not hurt bondholders and derivatives trading partners.
Earlier this year, the government has rescued giant insurer American International Group Inc and mortgage giants Fannie Mae Freddie Mac.
U.S. Treasury Secretary Henry Paulson declined to comment on Citigroup.
Despite its troubles, Citigroup is one of three final bidders, along with JPMorgan and Capital One Financial Corp for Chevy Chase Bank, a Bethesda, Maryland, lender with $11.4 billion in deposits, people familiar with the matter said.
Pandit suffered a setback last month when Wells Fargo & Co agreed to buy Wachovia Corp, trumping Citigroup's bid to buy much of the Charlotte, North Carolina-based bank and add $418.8 billion of deposits.
'LONG-TERM WINNER'
Alwaleed said the bank is "taking all the necessary steps to position the company to withstand the challenges facing the banking industry and the global economy."
The Saudi billionaire, a nephew of Saudi King Abdullah, said he is "fully confident that Citigroup's universal banking model and global franchise will make it a long-term winner in the financial services industry."
Alwaleed also came to the bank's aid in 1991, when he invested $590 million in Citigroup predecessor Citicorp, which at the time needed cash as it struggled with Latin American loan losses and a collapse in U.S. real estate prices.
Citigroup has lost $20.3 billion in the last year and taken tens of billions of dollars in writedowns on mortgage and other toxic debt. Analysts expect it to lose money in the fourth quarter, and some don't see any profit in 2009.
The second-largest U.S. bank by assets is looking at options now, including a sale of parts of the company or a merger with another firm, after its stock fell 50 percent this week, a person familiar with the matter said on Thursday.
Discussions so far have been internal, and some options --such as entering into a merger where other executives end up running the company -- are unpalatable to managers at Citigroup, the person said. The bank's board of directors is set to meet on Friday, and Morgan Stanley is not considering a possible bid, the Wall Street Journal reported.
Citigroup did not comment on the report, repeating that it has a "very strong capital and liquidity position" and is focused on a strategy that will generate benefits "over time." Morgan Stanley did not immediately return a call for comment.
Earlier Thursday, Saudi Prince Alwaleed bin Talal said he plans to increase his stake in Citigroup to 5 percent from less than 4 percent, calling its shares "dramatically undervalued."
Alwaleed expressed "full and complete support" for management, including Pandit, who said this week the bank will slash 52,000 jobs and 20 percent of expenses.
Investors were unimpressed, and drove the bank's shares below $5, a level not seen since 1994. The market value of Citigroup has fallen $48.7 billion this month alone.
Citigroup is not seeking any government financial aid, and is not seeing any unusual business activity, a person close to the bank said.
But government aid may have to be part of any deal for Citigroup, investors said. Raising capital, whether through a share sale or selling businesses, would be difficult in the current environment.
Citigroup "will get bailed out, and that's another unfortunate strain on the U.S. government," said Saj Karim, an investment adviser at Cannacord Capital in Waterloo, Ontario.
The government may look to augment the $25 billion it injected last month from a $700 billion industry rescue package. The bank has raised another $50 billion since the middle of 2007.
Analysts said the bank could face more than $20 billion in losses in 2009 on commercial real estate, credit cards and emerging markets, as the world economy sinks into recession.
"How much capital is Citi going to need?" said Keith Davis, a bank analyst at Farr, Miller & Washington in Washington, D.C. "I don't think anyone knows, and so the knee-jerk reaction is to sell first and ask questions later."
The bank has asked the U.S. Securities and Exchange Commission to reinstate a ban on the short-selling of financial stocks, in an attempt to arrest their downward spiral, a person familiar with the matter said. A prior ban expired Oct 8.
Other banks' shares also tumbled on Thursday, with JPMorgan Chase & Co falling 17.9 percent and Bank of America Corp closing down 13.9 percent. Along with Citigroup, the banks are components of the Dow Jones industrial average, which shed 5.6 percent.
JPMorgan is eliminating about 3,000 investment banking jobs, or 10 percent of that unit, to cope with the deteriorating economy, people familiar with the matter said. Bank of New York Mellon Corp announced 1,800 job cuts.
And KeyCorp, a Midwest regional bank, reduced its common stock dividend for the second time in six months.
Citigroup's market value, which once topped $270 billion, fell to $25.7 billion on Thursday. The bank was overtaken in market value this week by U.S. Bancorp and Bank of New York Mellon, despite being more than four times larger by assets than those companies combined.
Five-year credit default swaps for Citigroup rose to 395 basis points, meaning it would cost $395,000 annually to protect $10 million of debt, according to Phoenix Partners Group. That's up from $357,000 of annual payments on Wednesday, according to Markit.
But those levels are not as high as they were for other banks just prior to failure. Combined with the low share price, markets seem to be implying that either Citigroup will raise capital without government help, or it will receive government help that does not hurt bondholders and derivatives trading partners.
Earlier this year, the government has rescued giant insurer American International Group Inc and mortgage giants Fannie Mae Freddie Mac.
U.S. Treasury Secretary Henry Paulson declined to comment on Citigroup.
Despite its troubles, Citigroup is one of three final bidders, along with JPMorgan and Capital One Financial Corp for Chevy Chase Bank, a Bethesda, Maryland, lender with $11.4 billion in deposits, people familiar with the matter said.
Pandit suffered a setback last month when Wells Fargo & Co agreed to buy Wachovia Corp, trumping Citigroup's bid to buy much of the Charlotte, North Carolina-based bank and add $418.8 billion of deposits.
'LONG-TERM WINNER'
Alwaleed said the bank is "taking all the necessary steps to position the company to withstand the challenges facing the banking industry and the global economy."
The Saudi billionaire, a nephew of Saudi King Abdullah, said he is "fully confident that Citigroup's universal banking model and global franchise will make it a long-term winner in the financial services industry."
Alwaleed also came to the bank's aid in 1991, when he invested $590 million in Citigroup predecessor Citicorp, which at the time needed cash as it struggled with Latin American loan losses and a collapse in U.S. real estate prices.
Citigroup has lost $20.3 billion in the last year and taken tens of billions of dollars in writedowns on mortgage and other toxic debt. Analysts expect it to lose money in the fourth quarter, and some don't see any profit in 2009.
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