Small MTN owners hurdle in deal

Johannesburg - Small MTN investors want more money from India's Bharti Airtel for a planned multi-billion dollar tie-up, casting doubt over whether they will step in line if the two reach a deal.

Africa's biggest mobile phone company needs approval from three quarters of its shareholders to approve the cash-and-share swap, should it reach an agreement to create the world's third-biggest mobile operator.

But some investors see the deal as being "like a dead horse" because of the long delay in finalising the transaction, while others say they are being short-changed despite Bharti's recently sweetened offer.

"The seven percent sweetener wouldn't change my views," said Irnest Kaplan, independent analyst and MTN shareholder.

"If there was a sweetener in the region of 20-30% that would change the picture... making me more interested and (then I would) look at it more carefully."

Bharti has increased the cash component of its offer for a 49 percent stake in MTN to $10bn from a proposed $7.6bn, two people familiar with the matter told Reuters on Thursday.

On top of that, Bharti would pay $4bn in stock for a total package of $14bn, 7% more than the earlier $13bn proposed deal, they said.

South-Africa's government-owned Public Investment Corporation holds 21% of MTN, while the Mikati family from Lebanon, with 10%, is the other large owner.

Both have publicly voiced support for the deal, though the PIC has said it was looking for a sweetener. But support from others will have to be painstakingly canvassed.

Another analyst with shares in MTN, said minority shareholders were not likely to support the transaction, given the limited information provided by both companies.

They dislike the fact Bharti would pay for part of its stake in MTN with global depositary receipts (GDR) that would have to be counted within the small offshore asset allowance granted by South Africa's strict foreign exchange rules.

The two groups have extended exclusive talks twice and given themselves until the end of the month to decide whether to join forces.

An earlier tie-up collapsed over sensitivities over who would control what and the new deal - in which both companies will hold a large stake in each other's business - seems carefully crafted to avoid a repeat.

Some MTN shareholders said the pricing of the deal was "horrible" and they wanted a premium that would compensate them for losing control of a much-valued asset.

"It's not our intention to support a deal around the new speculated terms," said Jan Meintjes, a telecoms analyst at Gryphon Asset Management which holds MTN shares.

"I don't think this will make the deal sweet enough ... we feel MTN is worth substantially more than where it is trading."