Reliance Talking to Private Equity Groups on MTN Purchase

India's Reliance Communications is reported to be seeking as much as US$5 billion from a consortium of private equity groups to finance its expected purchase/merger of South Africa's MTN. Sources told the Times of India that Deutsche Bank, which is advising on the deal has talked to private equity firms Carlyle, Blackstone and Apax to raise between US$4-US$5 billion.

A Reliance spokesman declined to comment on the report.

Reliance and MTN agreed to a 45 day period of exclusive talks at the end of last month after discussions between Bharti Artel and MTN broke down over management issues. It is understood that billionaire, Anil Ambani who controls Reliance Communications is more flexible about reducing his personal stake in the company in order to secure the deal. In order to secure political approval for the deal in South Africa, there is general expectation that a reverse takeover will occur, with MTN technically buying Reliance Communications, while Ambani would then buy into the newly merged company.

Private Equity groups may be wary of investing in the company though due to regulatory uncertainty in some of the markets that MTN operates in, along with rising competition in both companies home markets. At a time of banking turmoil, raising funds could be expensive if the banks detect an uncomfortable degree of risk.

MTN has a market value of about $40 billion; Reliance is valued at just under $30 billion.

The combined entity would be a mobile giant focused on emerging markets, with more than 116 million customers across three continents.

On the web: Times of India

Posted to the site on 8th June 2008